2013’s Bottom 10 ETF Performers

October 29, 2013

Last week, we ran a story outlining the 10 best-performing ETFs year-to-date in 2013. The stars were two solar energy funds, Guggenheim’s Solar ETF (TAN | B-34) and the Market Vectors Solar Energy Fund (KWT | C-29), but there was also a pretty nice assortment of ETFs on that list.

Alternative energy monopolized the winner’s circle. We saw funds focused on solar, wind and the broad spectrum of clean energy; additionally, a few interesting surprises—China tech funds and the Global X Social Media Fund (SOCL | C-31)—peppered the year-to-date list, too.

On the other hand, the 10 worst-performing funds so far this year are not mixed when it comes to sectors.  The worst-performing funds focus on two district areas: market volatility and precious metals mining.

Ticker Fund Total Return (%)
VXX iPath S&P 500 VIX Short-Term Futures ETN -59.04
VIIX VelocityShares VIX Short Term ETN -59.04
VIXY ProShares VIX Short-Term -58.97
GLDX Global X Gold Explorers -53.81
GDXJ Market Vectors Junior Gold Miners -47.72
FDX Market Vectors Gold Miners -43.17
RING iShares MSCI Global Gold Miners -41.32
SLVP iShares MSCI Global Silver Miners -41.16
GGGG Global X PURE Gold Miners -39.57
SILJ PureFunds ISE Junior Silver (Small Cap Miners/Explorers) -38.83
Data 12/31/2012-10/25/2013. Excludes geared investments.

Short-term VIX futures ETNs and precious metals mining funds weren’t good friends to anyone’s portfolio during the year.

Too Volatile For VIX

Throughout 2013, domestic markets have hit peaks and valleys, with the ups marking ever-increasing records. Within the past week alone, the S&P 500 rallied past an all-time record when it struck 1,762.11 at the closing bell on Monday, Oct. 28.

The rocky, but steady, upward climb of domestic markets in 2013 has been great for U.S. investor confidence, but not for ETFs that focus on volatility, which aren’t necessarily meant to be held long term.

These ETNs are intended to be held as tactical exposure to the CBOE Volatility Index (VIX). As markets trend upward, VIX investments are forced down in terms of performance.

That explains why the iPath S&P 500 VIX Short-Term Futures ETN (VXX | A-47), the VelocityShares VIX Short Term ETN (VIIX | B-47) and the ProShares VIX Short-Term ETN (VIXY | A-47) all fell nearly 60 percent during the past 10 months, landing VXX and VIIX tied for worst ETF performers so far this year, with a 59.04 percent loss, and VIXY right behind at 58.97 percent.

Not The Year For Gold Miners

Behind the short-term VIX ETNs, the seven remaining underdogs of 2013 are all gold and silver mining funds.

From the Global X Gold Explorers fund (GLDX | D-25), which retreated 53.81 percent, sliding in at No. 4 on the list, and the PureFunds ISE Junior Silver Miners (Small Cap Miners/Explorers) fund (SILJ | F-34), which dropped 38.83 percent and falls into the 10th-worst spot of the year, mining funds haven’t struck much but underperformance this year.

Mining ETFs invest in the production process of precious metals, from the mines that extract the metals from the earth, to the storefronts where precious metals are sold to consumers, and everything in between, aside from the physical metals themselves.

Silver and gold haven’t shined much this year, with the SPDR Gold ETF (GLD | A-100) leading outflows of assets under management to the tune of more than $20 billion. The weak demand for gold ETFs is in contrast to the physical demand falling prices have brought to China and India. That market dichotomy has kept downward pressure on prices.

 

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