While last week’s list of best-performing ETFs for the year was dominated by energy names, the list of worst performers is a little more eclectic. Taken in aggregate, the list paints a picture of a risk-on environment for domestic markets, while some international markets slumped on political tensions.
Volatility Funds Fall On Economic Optimism
Four of the 20 worst-performing names of the year offer exposure to futures contracts on the Cboe Volatility Index. The VIX, a real-time market index representation of volatility expectations, has trended downward since the beginning of the year. The so-called fear index fell from 27 to just under 16 over the first six months of the year.
Chart courtesy of Bloomberg
The two worst-performing ETPs of the year were impacted by the VIX’s downward slope. The ProShares VIX Short-Term Futures ETF (VIXY) fell by 56.2% and the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) dropped by 56.1%. The ProShares VIX Mid-Term Futures ETF (VIXM) and the iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ) did slightly better, falling by 16.8% each, sheltered by the longer average maturity.
Gold miners seemed to be recovering after a rough first quarter, but came under pressure once again in June after the Fed indicated it might need to raise rates beginning in 2023.
Chart courtesy of StockCharts.com
The VanEck Vectors Junior Gold Miners ETF (GDXJ) and the Amplify Pure Junior Gold Miners ETF (JGLD) both track smaller cap gold mining companies, and fell by 13.8% and 11.8%, respectively. The Global X Gold Explorers ETF (GOEX) provides exposure to companies involved in the early stages of gold production as well as development; it fell 11.4%.
Political Tensions Show Up In Poor Performance
Six country ETFs with exposure to four countries found their way onto the worst-performing ETF list at the end of the second quarter. The iShares MSCI Turkey ETF (TUR) is down 18.1% through the end of the second quarter.
Chart courtesy of StockCharts.com
Turkey has dramatically underperformed emerging markets as a whole, as represented by the iShares MSCI Emerging Markets ETF (EEM). The country’s equities have been under pressure since President Erdogan fired the head of the country’s central bank, who had been popular with investors for his moves to rein in inflation.
The iShares MSCI Peru ETF (EPU) has fallen by 15.5% so far this year, with nearly 11% of the drop occurring in the month of June, after socialist candidate Pedro Castillo became the presumed president-elect.
Colombia equities have also fallen during the course of the year, bringing the Global X MSCI Colombia ETF (GXG) and the iShares MSCI Colombia ETF (ICOL) down by 13.1% and 11.9%, respectively. Indonesia equities faced a similar fate, with the iShares MSCI Indonesia ETF (EIDO) and the VanEck Vectors Indonesia Index ETF (IDX) dropping by over 12% each.
Clean Energy Stocks Cool Off
Two renewable energy ETFs have fallen by double digits this year. The iShares Global Clean Energy ETF (ICLN) is down around 16.5%, while the Invesco Solar ETF (TAN) has fallen by 13.1%. Renewable energy ETFs soared in 2020, with both funds seeing triple-digit gains.
The remaining funds on the worst performers list include some odds and ends.
The Cambria Global Tail Risk ETF (FAIL) is down 13.4% for the year. This fund aims to provide a defensive approach to global ex-U.S. equities by actively managing put options with similar exposure, and managing the collateral of the fund consisting mostly of cash and government bonds. Its negative performance in an environment with rising global equity markets is no surprise.
The AGFiQ U.S. Market Neutral Anti-Beta Fund (BTAL) is down 11.3% for the year. This fund is another that would potentially benefit from market declines but has not been done any favors by the current environment.
Though the Morgan Creek – Exos SPAC Originated ETF (SPXZ) has only been around since late January, it has fallen by 17.1% since inception. And although SPAC popularity is higher than ever, returns have not generally been favorable. (Read: SPAC ETF Brew Grows Frothy)
The iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ) is the only fixed income ETF to make the list, falling by 10.8% so far this year.
Education ETF Flunks First Half
Excluding VIX-related products, the Global X Education ETF (EDUT) is the worst performer of the year so far, falling by 21.3%. The fund tracks a market-cap-weighted index of global companies providing products and services that facilitate education. Nearly 20% of EDUT’s holdings are in China education stocks, which have been hit hard by the threat of a government regulation on private tutoring companies.
Worst-Performing ETFs Of 2021 (Ex. Leveraged/Inverse)
|VIXY||ProShares VIX Short-Term Futures ETF||-56.19%|
|VXX||iPath Series B S&P 500 VIX Short Term Futures ETN||-56.13%|
|EDUT||Global X Education ETF||-21.26%|
|TUR||iShares MSCI Turkey ETF||-18.06%|
|SPXZ||Morgan Creek - Exos SPAC Originated ETF||-17.09%|
|VIXM||ProShares VIX Mid-Term Futures ETF||-16.78%|
|VXZ||iPath Series B S&P 500 VIX Mid-Term Futures ETN||-16.77%|
|ICLN||iShares Global Clean Energy ETF||-16.46%|
|EPU||iShares MSCI Peru ETF||-15.48%|
|GDXJ||VanEck Vectors Junior Gold Miners ETF||-13.81%|
|FAIL||Cambria Global Tail Risk ETF||-13.39%|
|GXG||Global X MSCI Colombia ETF||-13.10%|
|TAN||Invesco Solar ETF||-13.07%|
|EIDO||iShares MSCI Indonesia ETF||-12.86%|
|IDX||VanEck Vectors Indonesia Index ETF||-12.38%|
|ICOL||iShares MSCI Colombia ETF||-11.87%|
|JGLD||Amplify Pure Junior Gold Miners ETF||-11.77%|
|GOEX||Global X Gold Explorers ETF||-11.37%|
|BTAL||AGFiQ U.S. Market Neutral Anti-Beta Fund||-11.32%|
|GOVZ||iShares 25+ Year Treasury STRIPS Bond ETF||-10.82%|
Data measures total returns for the year-to-date period through June 30, 2021.
Contact Jessica Ferringer at [email protected] and follow her on Twitter