Best Performing ETFs 3Q 2019

Though there have been plenty of worries to go around, most investors should be pleased with their returns so far in 2019. With three quarters in the books, the SPDR S&P 500 ETF Trust (SPY) is hanging on to a 17.8% return, on track for its best showing since 2017.

Other ETFs—many not even tied to the U.S. stock market—have done even better, with gains ranging from 34% to 115% for the top 15 ETFs of 2019. 

Rupee ETN Doubles

Blowing away the returns for everything else is the Market Vectors-Indian Rupee/USD ETN (INR), a $1 million product with a monster 115.3% gain. INR’s rally has been extremely unusual. As recently as Sept. 5, it was trading with only a 2.8% gain. Over the course of the next week, INR more than doubled.

The ETP’s surge has nothing to do with movements in the rupee. The Indian currency hasn’t moved much this year, and that’s reflected in INR’s net asset value, which is only up 3.5% year to date.

But that hasn’t stopped investors from bidding up the exchange-traded note, which now sports a stunning 105% premium. That’s possible because INR’s plumbing has been broken since June 2015, when issuer Morgan Stanley suspended creations for the product.

It managed to hold close to its NAV for most of the time since then, but not after the recent buying binge. Without the ability to create new ETNs, authorized participants can’t arbitrage away the premium as they typically do with exchange-traded products.

Thus, INR’s return is more a reflection of a broken product than anything. Incidentally, the ETN will mature next March. At that time, the notes will be redeemed at their net asset value, which is likely to be substantially lower than current values. Buyer beware.

Best-Performing ETFs Of 2019 (excluding leveraged/inverse)

Data measures total returns for the year-to-date period through Oct. 2.
 

Outperforming Metal

Taking the No. 2 spot on the best-performers list is another small product, the $9 million iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN), with a 66.8% return.

Fear not: Despite being an ETN, JJN has tracked its index and nickel prices closely this year. The industrial metal was last trading around a five-year high, strongly outperforming other base metals like copper, aluminum and tin.

Analysts say that a nickel ore export ban by No. 1 producer Indonesia is driving this year’s rally. The country aims to use the nickel ore for value-added domestic consumption.

Miners Get A Bounce

JJN isn’t the only commodity-related product to find itself among the best performers. Though no physically backed gold ETFs are on the list—spot gold prices are up 17.7% year to date—a few gold miner ETFs are.

The U.S. Global GO Gold and Precious Metal Miners ETF (GOAU) and the iShares MSCI Global Gold Miners ETF (RING) jumped about 37% apiece.

Though they’ve certainly rebounded from their worst levels, gold miners are still depressed from a longer-term perspective, and most investors still favor bullion-tracking ETFs over miner ETFs.

Real Estate Heating Up

Another area that’s outperforming this year is real estate, and a number of real-estate-related products find themselves on the best-performers list.

The iShares U.S. Home Construction ETF (ITB) and the Invesco Dynamic Building & Construction ETF (PKB) surged 42.6% and 34.2%, respectively, since the start of the year.

ITB and PKB focus on stocks of homebuilders. On the other hand, another pair of real estate ETFs on the list, the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR) and the Pacer Benchmark Industrial Real Estate SCTR ETF (INDS), target real estate investment trusts, companies that own and rent out real estate properties. They’re each up more than 37% year to date.

Other Strong Performers

Rounding out the list of best performers are a pair of solar ETFs, a pair of semiconductor ETFs and a futuristic “exploration” ETF.

The Invesco Solar ETF (TAN) and the ALPS Clean Energy ETF (ACES) rallied 56.3% and 35.4%, respectively, so far this year. Though far off its highs of a decade ago, TAN recently reached its loftiest level since 2016.

Growing demand for renewable energy sources and the expiration of a federal tax credit may be driving solar shares higher, say analysts.

Meanwhile, the SPDR S&P Semiconductor ETF (XSD) and the VanEck Vectors Semiconductor ETF (SMH) climbed more than 35% this year in anticipation of the rollout of 5G technology starting in 2020.

Finally, the SPDR S&P Kensho Final Frontiers ETF (ROKT) is up 34.2% year to date. Launched a year ago, ROKT holds companies driving innovation behind the exploration of deep space and deep sea. Top holdings are primarily aerospace and defense companies like Northrop Grumman, L3Harris Technologies and Lockheed Martin.

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