In a year in which most asset classes rallied, the competition to be among the 10 top-performing ETFs of 2016 was steep. It may come as a surprise then that the competition to be among the 10 worst-performing exchange-traded funds of 2016 was just as steep. Losses for this group were 30% or more―and these are nonleveraged and noninverse ETFs we're talking about.
VIX ETFs Down 70% In 2016
The three products at the bottom of the heap were all tied to the CBOE Volatility Index, better known as the VIX. The iPath S&P 500 VIX Short-Term Futures ETN (VXX), the VelocityShares Daily Long VIX Short-Term ETN (VIIX) and the ProShares VIX Short-Term Futures ETF (VIXY) each plunged 70% in the year-to-date period through Dec. 27.
Measures of implied volatility like the VIX typically move inversely to stock prices. It's been a wild ride for the index in 2016. In February, the VIX briefly topped 28 amid China-related concerns, and then again in June it reached 26 in the aftermath of "Brexit."
A Wild Ride For The VIX In 2016
But those spikes proved to be temporary. Earlier this month, as stock prices hit record highs, the VIX fell to a 2 1/2-year low of 11.3, down significantly from where it started the year, around 18. The aforementioned VIX-linked ETFs fell along with their underlying index. They've also had to contend with roll costs from contango, which is a drag on returns for futures-based products.