Top Performing ETFs Through Q3 2017

Call it the “Teflon” market. Nine months into the year, stocks have yet to see a pullback of any significance.

On the contrary―the S&P 500 continued to grind higher to ever-higher records during the third quarter, finishing the month of September around the 2,519 mark, for a year-to-date gain of 14.2%.

As impressive as that is, there's a group of funds that have blown the socks off the return for the broader market. Gains for these ETFs are no less than 55% and as much as 173%.

We take a look at some of these top-performing ETFs of 2017.

Shorting Volatility

We came up with two lists of funds for this article. One includes every single ETF on the market; the other excludes inverse and leveraged exchange-traded products. There's no overlap between the two.

The all-encompassing list largely includes leveraged versions of the funds on the narrower list. The exceptions are three inverse VIX products on the list, the REX VolMAXX Short VIX Weekly Futures Strategy ETF (VMIN), the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) and the ProShares Short VIX Short-Term Futures ETF (SVXY), each with gains of more than 106%.

Shorting volatility has been one of the top trades of the year as the CBOE Volatility Index wallows near record lows.

Top-Performing ETFs Of 2017 (All Products)

Data measures the year-to-date period through Sept. 29

Innovation ETFs Surge

The tamer list, which excludes inverse and leveraged ETFs—and which some might consider more "investable"—is topped by the ARK Innovation ETF (ARKK), with a 71% year-to-date gain.

ARKK is one of two ETFs on the list issued by ARK Investment Management, a company that focuses on thematic ETFs with a "disruptive innovation" bent.

The fund holds companies that work in fields related to genomics, next-generation internet, and industrial innovation.

Top-Performing ETFs Of 2017 (excluding inverse/leveraged)

Data measures the year-to-date period through Sept. 29

Technology and health care are the top-performing stock market sectors of the year, and ARKK has taken advantage of that by holding some of the highest-flying names in the group, including Tesla, Amazon, Nvidia and AthenaHealth.

The fund also has a sizable stake in the Bitcoin Investment Trust (GBTC), equal to 5.1% of the ETF's holdings. The over-the-counter traded bitcoin investment vehicle is up a stunning 477% this year.

The ARK Web x.0 ETF (ARKW), a narrower ETF from ARK that holds next-generation internet companies, is also on the top 10 list, with a gain of 62%.

Worst Performing ETFs Of The Year

Internet Giants Buoy China ETFs

The two ARK ETFs aren't the only tech-focused funds to surge this year. The KraneShares CSI China Internet ETF (KWEB), the Guggenheim China Technology ETF (CQQQ) and the Emerging Markets Internet & Ecommerce ETF (EMQQ) are a trio of international tech ETFs that rallied hard in 2017.

Through the first nine months of the year, KWEB was up 63.9%; CQQQ was up 62.1%; and EMQQ was up 59.2%.

There's a lot of overlap between the holdings of all three funds. Each has the same top three holdings: Baidu, Tencent and Alibaba. These Chinese internet companies and others like them have skyrocketed this year thanks to soaring profits.

The WisdomTree China ex-State-Owned Enterprises Fund (CXSE), with a 64.5% year-to-date return, is another ETF on the top 10 list. Even though it provides broad exposure to the Chinese stock market (excluding government-owned firms), its biggest stakes are in the internet behemoths.

Once again, the top three holdings are Baidu, Tencent and Alibaba.

The one China ETF on the list that is a bit more distinct than the rest is the Global X China Materials ETF (CHIM). The fund, which is up 55.8% this year, targets the basic materials industry in China.

Top holdings include steel companies, specialty mining companies, aluminum companies and more.

Brazil ETFs Unfazed By Scandal

Outside of China ETFs, the best-performing country funds this year are tied to Brazil. The iShares MSCI Brazil Small-Cap ETF (EWZS) and the VanEck Vectors Brazil Small-Cap ETF (BRF) jumped about 56% each as hopes grew that the Brazilian government could enact pension reforms in the coming year.

Investors have also been encouraged by strengthening economic growth. Brazil stocks briefly hit a road bump midyear after corruption allegations against President Michel Temer were revealed. That saga is still playing out.

Contact Sumit Roy at [email protected]