As the S&P 500, the Dow Jones industrial average and the Nasdaq Composite rose from the ashes of what was the market’s worst plunge since the Great Depression, at least 14 U.S. equity ETFs have delivered more than 400% in total returns since the 2009 low. One of them broke above 500% in gains in seven years. And just as notable is the fact that the top three performers are all Guggenheim funds—a firm known for its pure-style and equal-weight methodologies.
The steam of this bull market has significantly cooled in the past year or so thanks to growing concerns of a global recession, fears of a major slowdown in China and ever-so-weak oil prices, but it’s worth looking back at what has worked for investors in this rally.
Here we look at the five-best-performing U.S. equity ETFs as we mark the 7th anniversary of the post-credit crisis bull market.
Guggenheim S&P 500 Pure Value (RPV | A-64) is up 537%
Since the March 2009 market low, this pure-style ETF has led all U.S. equity ETFs, with gains of 537%.
RPV tracks an index of primarily large-cap U.S. stocks. The index covers about 33% of the S&P 500's market cap, using three factors to select value stocks.
What’s interesting here is that RPV tends to tilt toward the lower market-cap spectrum of the S&P 500, owning more midcaplike stocks, which essentially increases the overall risk in the fund. In this case, the more risk equaled more reward. RPV is the best-performing U.S. equity ETF since the market crash.
The fund, however, remains relatively small for the size of its success. It has about $695 million in assets, and trades on average about $17.92 million in daily volume.
Owning RPV costs investors about $41 per $10,000 invested a year. That cost comes from 0.35% in expense ratio and an average trading spread of 0.06%.
The chart below shows RPV’s performance relative to the SPDR S&P 500 (SPY | A-97) over the past seven years:
RZV is another style ETF—and also from Guggenheim—that has led the pack in gains. The fund, which tracks a fundamentally weighted index of U.S.-listed small-cap value companies, has a strong tilt toward micro caps. Again, that tilt increases the market risk in the fund, and over the past seven years, it has worked beautifully to deliver outsized gains.
As the chart below shows, RZV has significantly outperformed the competing SPDR S&P 600 Small Cap ETF (SLY | A-89) as well as the SPY.
RZV remains small, with only $157 million in total assets, and an average daily trading volume of only $1.26 million.
The fund costs 0.35% in expense ratio, but once trading spreads are taken into account, investors are shelling out about 0.62% a year to own it, or $62 per $10,000 invested.
RCD is another Guggenheim smart-beta fund found among the best-performing U.S. equity ETFs in this bull market. Consumer discretionary is the best-performing S&P 500 sector since the March 2009 low, rallying more than 400% in that period. For comparison, financials comes in second, with about 300% in gains.
RCD not only invests in the best-performing sector of the rally, it equal-weights the portfolio, mitigating some of the single-stock risk associated with market cap. Specialty retailers, hotels, entertainment and media companies represent the biggest segment weightings in the portfolio.
Relative to a market-cap approach such as the Consumer Discretionary Select Sector SPDR (XLY | A-94), the fund has delivered about 55 percentage points more in gains, as the chart below shows.
RCD has only $93 million in total assets, and it costs about $64 per $10,000 invested when you account for expense ratio—0.40%—and trading spreads.
Pharmaceuticals, much like other biotech names, have had an impressive run since the market crash. PJP uses a quant-driven methodology to select and weight pharmaceutical companies based on fundamental and risk factors for a portfolio mix that not only tends to tilt toward mid- and smaller-cap names in the segment, but also offers exposure to biotech.
This multifactor mix has delivered outsized gains relative to competing funds such as the SPDR S&P Pharmaceuticals (XPH | A-36), and even the broad segment of health care, as evidenced by the Health Care Select SPDR (XLV | A-93) in the chart below.
PJP is the most expensive fund in this segment, with an expense ratio of 0.56% and an average trading spread of 0.09%, but because of the fund’s methodology and attempt to beat the market, it remains an investor favorite. PJP has $1.2 billion in assets compared to XPH’s $487 million and the iShares U.S. Pharmaceuticals (IHE | A-63)’s $692 million.
PowerShares Nasdaq Internet (PNQI | A-61) is up 435%
PNQI invests in a broad range of the most liquid U.S.-listed Internet companies—there are currently about 90 names in the portfolio.
The fund tries to minimize single-stock risk by capping the five biggest companies at 8% and the remaining securities at 4%. Launched in June 2008, PNQI has rallied some 435% in seven years as tech stocks surged.
Since the market bottomed, the U.S. tech sector was the fourth-best-performing out of the S&P 500 sectors, with gains of more than 245%.
PNQI is a U.S. tech fund, but it also includes global Internet companies that have U.S. listings, such as China's Baidu. In fact, from a country composition, China represents about 15% of the overall portfolio—the U.S. snags about 81% of the mix.
The $260 million fund costs 0.60% in expense ratio, which is in line with competing funds, but it trades with a relatively wide average spread of 0.18%, putting total cost of ownership at about $78 per $10,000 invested a year.
The chart below shows PNQI’s rise compared with the competing $3 billion First Trust Dow Jones Internet (FDN | B-59)—the most popular in this segment—and the $20 million PowerShares Dynamic Networking (PXQ | C-19):
Charts courtesy of Stockcharts.com
Contact Cinthia Murphy at [email protected].