2020’s stock market performance has been nothing short of stellar. Brushing off one of the worst economic contractions in history, the S&P 500 surged back from the depths of despair in March to post a 15% return for the year.
But as great as the venerable index has done this year, it doesn’t come close to reflecting how spectacular the ascent has been in certain pockets of the market. The most frenzied buying of growth stocks in two decades has fueled astronomical gains for select ETFs. A minimum of a 110% return was required to be among the top 10 best-performing ETFs of 2020, while a 94% gain was the threshold to enter the top 20.
Here we take a look at some of this year’s highest-flying ETFs.
ARK ETFs Dominate
This year’s top-performing ETF comes from none other than breakout ETF sensation ARK Invest. The issuer has four of the top 20 funds of the year, including No. 1, the ARK Genomic Revolution ETF (ARKG), with a 185.3% year-to-date gain.
ARKG is a thematic, health-care ETF focused on genomics, or the study of the complete set of organisms’ genes. Thanks to the tumbling cost of DNA sequencing, the genomics field has taken off, opening the door to new treatments and cures.
Much of ARKG’s portfolio holds biotech companies looking for cancer treatments and cures for rare diseases. Stocks of gene editing and genetic testing companies can be found in the portfolio as well.
ARKG’s focus on genomics rather than the broader health care space has served it well. In fact, it’s the only health-care-related ETF within the top 20 ETFs of the year.
Each of these funds touches on next-generation technologies like fintech, autonomous tech, robotics and cloud computing.
Many of these themes have worked extremely well this year in the pandemic environment, and ARK’s ETFs were positioned perfectly to take advantage of them.
Best-Performing ETFs Of 2020 (ex. leveraged/inverse)
|ARKG||ARK Genomic Revolution ETF||185.32%|
|TAN||Invesco Solar ETF||179.35%|
|PBW||Invesco WilderHill Clean Energy ETF||162.00%|
|ARKW||ARK Next Generation Internet ETF||150.77%|
|QCLN||First Trust NASDAQ Clean Edge Green Energy Index Fund||149.12%|
|ARKK||ARK Innovation ETF||148.25%|
|IBUY||Amplify Online Retail ETF||112.22%|
|PBD||Invesco Global Clean Energy ETF||112.10%|
|IPO||Renaissance IPO ETF||110.43%|
|ACES||ALPS Clean Energy ETF||108.95%|
|KGRN||KraneShares MSCI China Environment Index ETF||107.37%|
|ICLN||iShares Global Clean Energy ETF||104.88%|
|CNRG||SPDR S&P Kensho Clean Power ETF||104.76%|
|ONLN||ProShares Online Retail ETF||104.58%|
|LIT||Global X Lithium & Battery Tech ETF||101.83%|
|OGIG||O'Shares Global Internet Giants ETF||101.57%|
|WCLD||WisdomTree Cloud Computing Fund||101.41%|
|ARKF||ARK Fintech Innovation ETF||101.33%|
|XVZ||iPath S&P 500 Dynamic VIX ETN||96.64%|
|SMOG||VanEck Vectors Low Carbon Energy ETF||93.97%|
Data measures total returns for the year-to-date period through Dec. 14, 2020
Of course, ARK ETFs aren’t the only ones to take advantage of this year’s boom in pandemic-accelerated growth stocks.
There is also a pair of e-commerce-focused ETFs that benefited from the shift to online commerce and the struggles of many brick-and-mortar retailers.
The Amplify Online Retail ETF (IBUY) and the ProShares Online Retail ETF (ONLN) both more than doubled this year. The O’Shares Global Internet Giants ETF (OGIG), which holds a broader basket of internet stocks (think Alphabet and Facebook, in addition to Amazon and Alibaba) also doubled in the period.
Meanwhile, the WisdomTree Cloud Computing Fund (WCLD) surged 101% thanks to its focus on one of the hottest areas of technology. WCLD is a fund that is riding the cloud computing megatrend, where computing and storage resources are increasingly being delivered through the internet. Most of the companies in this ETF are enterprise software companies that deliver their software through the cloud—otherwise known as software-as-a-service.
Alternative Energy’s Comeback
While the tech sector dominated this year’s market headlines, alternative/clean energy ETFs were the most numerous among the 20 best-performing ETFs of the year.
The Invesco Solar ETF (TAN), the Invesco WilderHill Clean Energy ETF (PBW) and the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) each gained more than 149.1% in the year-to-date period.
A group known for booms and busts, alternative energy stocks took off this year on anticipation that the incoming Biden administration will be supportive of the industry. Biden has pledged to expand tax credits for renewable energy industries and unleash $2 trillion worth of spending on infrastructure and clean energy over four years.
Though some of his boldest proposals may face resistance if the Democrats fail to capture control of the Senate in 2021, just the prospect of having Biden in the White House seems to have lit a fuse under alternative energy stocks.
Finally, the Renaissance IPO ETF (IPO) is a noteworthy fund that’s been buoyed by this year’s strong IPO market. Initial public offerings are on track for their best year in 20 years based on the amount of money raised and the size of their first-day pops.
While IPO (the ETF) certainly holds stocks of some of this year’s new market entrants, its outperformance can largely be attributed to the strong performance of the IPO classes of 2018 and 2019—many of them tech stocks that have performed phenomenally this year.