Best Performing ETFs 3Q 2020

Three-quarters of the way into the year and 2020 is shaping up to be a solid to stellar year for investors.

The pandemic-fueled roller coaster ride aside, returns for most asset classes have been good so far. The SPDR S&P 500 ETF Trust (SPY) ended September with a 5.6% gain for the year—down a bit from its 12.3% high point in September, but much better than most would have imagined just a few months ago.

But as decent as SPY’s performance has been this year, it pales in comparison to this year’s best-performing ETFs. Funds tied to high-flying areas like technology and health care have exploded to the upside in 2020.

Here we take a look at some of those ETFs.

Volatility Reigns

Headlining this edition of the best-performing ETFs of the year is the iPath S&P 500 Dynamic VIX ETN (XVZ). Volatility spiked to record highs in March as the coronavirus sent stocks plunging. The Cboe Volatility Index, or VIX, has been come down from those all-time-high levels, though it remains elevated as investors continue to hedge their positions using options ahead of the presidential election in November.

With a 114.4% year-to-date gain, XVZ has managed to outperform other VIX products by employing a shifty strategy that attempts to minimize the roll costs that eat into the returns for most futures products. Currently, the ETNs are long VIX midterm futures contracts and short VIX near-term futures contracts. Using this strategy, the product has managed to hold on to most of its gains from March despite a steep pullback in the VIX itself.

The ProShares VIX Mid-Term Futures ETF (VIXM) and the iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ) are two other VIX-based products up by more than 90% this year. Here are the top performers. The full list can be found at the bottom of the article.

Top Performing ETFs Of The Year (ex. leveraged/inverse)

Data measures total returns for the year-to-date period through September 30. The full list can be found at the bottom of the article.

Solar Hopes

Aside from the aforementioned XVZ, the only other nonleveraged ETP to break the triple-digit barrier this year is the Invesco Solar ETF (TAN), up 110.4% through the first nine months of the year.

After years of underperformance, TAN is heating up on expectations that a Biden victory in the November elections could be a boon for the solar industry. One of the Democratic presidential nominee’s plan calls for $2 trillion worth of spending on infrastructure and clean energy over four years. Biden has also promised to deliver zero-carbon emissions from the power sector by 2035 if elected, which presumably would mean solar making up a much larger part of the country’s generation capacity going forward.

The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), the Invesco WilderHill Clean Energy ETF (PBW) and the ALPS Clean Energy ETF (ACES) are a few other clean energy ETFs to make the best-performing ETFs list.

ARK Dominates

The next group of ETFs to outperform this year is noteworthy not just for their strategies, but for their manager. A total of four actively managed ETFs from issuer Ark Invest are among the top 20 ETFs this year.

The impressive group includes the ARK Genomic Revolution ETF (ARKG), the ARK Next Generation Internet ETF (ARKW), the ARK Innovation ETF (ARKK) and the ARK Fintech Innovation ETF (ARKF).

Each of these funds touches on next-generation technologies like genomics, fintech, autonomous tech, robotics and cloud computing.

Many of these themes have worked extremely well this year in the pandemic environment, and ARK’s ETFs were positioned perfectly to take advantage of them.

Tech Boom

Of course, ARK ETFs aren’t the only ones to take advantage of this year’s boom in technology stocks. The WisdomTree Cloud Computing Fund (WCLD) is another big technology winner.

There are also a bunch of e-commerce-focused ETFs that are benefiting from the shift to online commerce and the struggles of many brick-and-mortar retailers.

The ProShares Online Retail ETF (ONLN), the ProShares Long Online/Short Stores ETF (CLIX) and the Amplify Online Retail ETF (IBUY) are in that category.

Finally, the Renaissance IPO ETF (IPO) is a noteworthy fund that’s been buoyed by this year’s strong IPO market. Initial public offerings are on track for their best year in at least 20 years based on the amount of money raised and the size of their first day pops.

While IPO (the ETF) certainly holds stocks of some of this year’s new market entrants, its outperformance can largely be attributed to the strong performance of the IPO classes of 2018 and 2019—many of them tech stocks that have performed phenomenally this year.

For a full list of this year’s top-performing ETFs, see the table below:

Best Performing ETFs Of The Year (ex. leveraged/inverse)

Data measures total returns for the year-to-date period through September 30.

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