Worst Performing ETFs Of 2Q 2019

These funds have struggled to find their footing in a strong year for markets.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

This year’s Teflon market has fooled the naysayers and delivered strong returns for most ETF investors. With the SPDR S&P 500 ETF Trust (SPY) up by more than 17% in a little over six months, it’s been hard to go wrong in the markets.

Earlier this week, we highlighted some of the best of the U.S.-listed ETFs this year. With so many ETFs performing well, it was understandably tough to make the top performers list.

A solar ETF, the Invesco Solar ETF (TAN), with more than 50% returns, and an IPO fund, the Renaissance IPO ETF (IPO), with returns of 35%, bookended the list, but there are countless other funds doing exceptionally well this year.

It’s not surprising then that there aren’t that many funds doing poorly in 2019. In fact, of the ETFs that were around at the end of last year, only about a tenth of them are down on a year-to-date basis.

That group is what we will be looking at in this article, the worst-performing ETFs of the year.

Doomed By Aggressive Bets

As is typically the case, the worst-performing ETFs are either leveraged, inverse or VIX products (or some combination of the three). This year is no exception. The VelocityShares Daily 2x VIX Short-Term ETN (TVIX), the Direxion Daily Semiconductor Bear 3x Shares (SOXS) and the United States 3x Short Oil Fund (USOD) are among the worst-performing ETFs, doomed by their aggressive bets on or against volatile areas of the markets.

 

Worst Performing ETFs Of 2019 (all-encompassing)

TickerFundYTD Return (%)
TVIX VelocityShares Daily 2x VIX Short-Term ETN-76.96
UVXY ProShares Ultra VIX Short-Term Futures ETF-65.23
SOXS Direxion Daily Semiconductor Bear 3x Shares-61.35
USOD United States 3x Short Oil Fund-59.74
DWT VelocityShares 3x Inverse Crude Oil ETN-59.22

Note: Data measures total returns for the year-to-date period through July 9.

 

Pakistan ETF Tumbles

The table below strips out the leveraged, inverse and VIX products, resulting in an interesting group of poor-performing funds. These funds, which only take standard long positions with no leverage, have dropped between 4.3% and 16.5% so far this year, underperforming the broader markets.

 

Worst-Performing ETFs Of 2019 (excluding inverse/leveraged/VIX products)

TickerFundYTD Return (%)
PAK Global X MSCI Pakistan ETF-16.47
UNG United States Natural Gas Fund LP-15.90
BDRY Breakwave Dry Bulk Shipping ETF-14.15
FNG AdvisorShares New Tech & Media ETF-13.55
SCIF VanEck Vectors India Small-Cap Index ETF-12.08
INCO Columbia India Consumer ETF-9.05
NGE Global X MSCI Nigeria ETF-9.01
UNL United States 12 Month Natural Gas Fund LP-8.47
SCIN Columbia India Small Cap ETF-7.69
FXS Invesco CurrencyShares Swedish Krona Trust-7.23
WEAT Teucrium Wheat Fund-6.58
FKO First Trust South Korea AlphaDEX Fund-6.52
PTMC Pacer Trendpilot US Mid Cap ETF-5.16
LIT Global X Lithium & Battery Tech ETF-4.52
CSF VictoryShares US Discovery Enhanced Volatility Wtd ETF-4.34

Note: Data measures total returns for the year-to-date period through July 9.

 

The Global X MSCI Pakistan ETF (PAK) headlines this inglorious list. Tepid economic growth and a $6 billion IMF bailout that could spur government belt tightening have given investors little reason to bargain hunt in beaten-up Pakistani stocks.

The country’s economy is barely growing above 2%, and there is nothing on the horizon for investors to get excited about, except maybe a downgrade of Pakistani shares by MSCI from “emerging markets” to “frontier markets” status, a move that could ironically spur more inflows into the country’s stocks, according to Bloomberg.
 

Other EM Laggards

Pakistan isn’t the only emerging market country performing badly in 2019. Though the iShares Core MSCI Emerging Markets ETF (IEMG) is up 8.7% on the year, the VanEck Vectors India Small-Cap Index ETF (SCIF), the Global X MSCI Nigeria ETF (NGE) and the First Trust South Korea AlphaDEX Fund (FKO) are all lagging.

Korean stocks, in particular, got hit recently after Japan escalated a trade rift between the two countries.

Commodity Losers

Along with emerging markets, a few commodity ETFs also made an appearance on the worst performers list. The United States Natural Gas Fund KP (UNG), the Breakwave Dry Bulk Shipping ETF (BDRY), the Teucrium Wheat Fund (WEAT) and the Global X Lithium & Battery Tech ETF (LIT) all sagged on a year-to-date basis.

Natural gas prices are at a three-year low as the inexorable rise in U.S. energy production continues, and demand, while also increasing, just can’t keep up.

When Trend Following Goes Wrong

Finally, rounding out the worst performers list are two trend-following ETFs, the Pacer Trendpilot U.S. Mid Cap ETF (PTMC) and the VictoryShares U.S. Discovery Enhanced Volatility Wtd ETF (CSF).

The two funds provide exposure to U.S. midcap and small cap stocks, respectively, but occasionally shift to cash positions when markets begin to trend lower. This toggling between stocks and cash ideally limits downside when markets are dropping, while preserving upside when they are rising.

But since the market top last October, the two ETFs got hit by the market sell-off, without benefiting from the rally that followed.

That is the peril of mechanical, trend-following strategies.

​Email Sumit Roy at [email protected] or follow him on Twitter @sumitroy2

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.