The worst-performing exchange-traded funds of 2015 were chock-full of commodity names. In a year in which commodities across the board plunged on the back of the slowdown in emerging markets and robust supplies, that shouldn't come as a surprise to anyone. Most broad commodity indexes fell to their lowest levels since 2009.
Energy The Biggest Loser Of 2015
The five worst-performing ETFs of 2015, excluding inverse or leveraged funds, were all energy funds, which fell by 50% or more. The First Trust Revere Natural Gas ETF (FCG | B-98)—the only pure-play fund focused on natural gas equities—was the biggest loser of 2015, with a 59.5% loss through Dec. 28.
Considering that natural gas hit 16-year lows at $1.68/mmbtu (the lowest inflation-adjusted price on record) earlier this month, FCG’s bloodbath makes sense.
The Yorkville High Income MLP ETF (YMLP) was another standout underperformer, with a 57.5% decline. MLPs―a tax-advantaged structure often used by energy infrastructure companies―were seen as a relatively safe way to invest in the U.S. energy boom while receiving high yields.
But with oil and natural gas prices plunging to levels few had imagined they would, that sense of safety quickly disappeared. MLPs were hammered all year long, and YMLP, which holds the smaller, riskier names in the group, fared the worst.
Speaking of energy prices, the iPath S&P GSCI Crude Oil Total Return ETN (OIL | B-92), which offers straightforward exposure to front-month oil futures contracts, lost 50% this year. That compares to a 30.8% loss for WTI futures, with the underperformance stemming from "roll costs" due to contango.
Along with energy, the other commodity sector to see steep losses in 2015 was metals. From gold (which fell by 10%), to copper (which fell by 26%), to nickel (which fell by 43%), it was an across-the-board decline for metals this year.
The SPDR S&P Metals and Mining ETF (XME | A-66), an equal-weighted basket of mining companies, took the biggest hit when it comes to metals ETF, dropping 49.4%.
Other notable losers include the iPath Bloomberg Nickel Subindex Total Return ETN (JJN | F-93) with a 47% loss, the Market Vectors Rare Earth/Strategic Metals ETF (REMX | F-1) with a 44.8% loss, and the Global X Copper Miners ETF (COPX | D-99), with a 44% loss.
Emerging Markets Walloped
Outside of commodities, the other group to see big declines this year was emerging markets. A wide array of emerging market country ETFs fell precipitously this year, with Brazil leading the pack amid a brutal recession and political turmoil in the country.
Faring only slightly better were the Market Vectors Indonesia Small Cap ETF (IDXJ | F-61), down 42.7% for the year, the iShares MSCI Colombia Capped ETF (ICOL | D-82), down 41.6%, and the iShares MSCI All Peru Capped ETF (EPU | C-42), down 34.6%.
These select emerging market ETFs performed much worse than the broad-based Vanguard FTSE Emerging Markets ETF (VWO | C-86), which "only" lost 17% thanks to relatively strong performance in emerging market heavyweights such as China and India.
Other Areas Of Pain
Commodity and emerging market ETFs were far and away the bottom of the barrel in terms of performance in 2015. In fact, the bottom 40 ETFs were all related to one of those two groups.
Only at No. 41 do you see something outside those areas: the Global X FTSE Greece 20 ETF (GREK | D-60), which lost 39%. That's followed by four VIX futures products at Nos. 54 to 57, such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX | B-47), which fell by 36.5%.
The IQ Canada Small Cap ETF (CNDA | D-60) is another fund to make its way into the worst-performers list—at No. 70 with a 34% decline. Of course, its heavy weighting in energy and basic materials didn't do it any favors.
Finally, the iShares International Preferred Stock ETF (IPFF | C ) is another noncommodity/nonemerging market fund that put in sizable declines in 2015. With a 26.2% loss, that was enough to push it to No. 121 on the worst-performers list.
Editor’s Note: This article excludes leveraged/inverse ETFs.
Contact Sumit Roy at [email protected].