A bumpy start to the New Year temporarily puts leveraged ETFs in the driver’s seat.
Last year was a banner year for equities, as the S&P 500 Index soared to a 29 percent return fueled in part by the Federal Reserve’s easy money policies, lifting returns of equity-focused ETFs in the process.
But the good times have not rolled over into the New Year, as an additional $10 billion-a-month taper by the Fed, a slowdown in China and weakness in emerging markets such as Thailand and Turkey have spooked investors. Year-to-date, the S&P is down 5.0 percent.
Leveraged ETFs Tops
Enter leveraged and inverse ETFs, which topped the charts as the best and worst ETFs year-to-date. For example, the VelocityShares 3X Long Natural Gas ETN (UGAZ), the Direxion Daily Russia Bear 3X (RUSS) and the Direxion Daily Brazil Bear 3x (BRZS) year-to-date have returned 50.9 percent, 42.3 percent and 39.2 percent, respectively, according to data compiled by ETF.com.
UGAZ provides 3x the daily return of the S&P GSCI Natural Gas Index Excess Return, a production-weighted index of world natural gas producers listed in Organisation for Economic Co-operation and Development countries. The fund has a high expense ratio—1.65 percent, or $165 for every $10,000 invested.
BRZS looks to give investors 300 percent of the inverse (or opposite) of the performance of the MSCI Brazil 25-50 Index. The fund’s expense ratio is 1.00 percent, or $100 for every $10,000 invested.
RUSS attempts to provide -3x daily exposure to a broad and comprehensive underlying index that includes Russian companies domiciled and traded inside and outside of Russia. However, the fund, which also has a 1.00 percent expense ratio, is currently at high risk for closure due to a lack of investor interest, according to an ETF.com analyst report. RUSS launched in May 2011 and currently manages $5.8 million.
Top 10 YTD Performers
|Ticker||Name||YTD Performance||Weekly Performance||AUM ($, mm)|
|UGAZ||VelocityShares 3X Long Natural Gas ETN||50.88||0.00||50.74|
|RUSS||Direxion Daily Russia Bear 3X||42.28||0.00||6.36|
|BRZS||Direxion Daily Brazil Bear 3x||39.17||0.00||3.53|
|JNUG||Direxion Daily Junior Gold Miners Bull 3X||38.12||0.00||27.19|
|BOIL||ProShares Ultra DJ-UBS Natural Gas||36.90||0.00||56.89|
|NUGT||Direxion Daily Gold Miners Bull 3X||32.50||0.00||680.14|
|BXDB||Barclays Short B Leveraged Inverse S&P 500 TR ETN||32.25||0.00||2.29|
|YANG||Direxion Daily FTSE China Bear 3X||30.20||0.00||16.93|
|KORZ||Direxion Daily South Korea Bear 3X||28.69||0.00||1.51|
|EDZ||Direxion Daily Emerging Markets Bear 3x||28.44||0.00||106.77|