Worst Performing ETFs Of 2Q 2018

Health care, internet and oil ETFs are among the top-performing ETFs of the year, according to data compiled by ETF.com earlier this week. It’s now time to take a look at the other side of the coin, the ETFs that are faring the worst.

Once again, we have two lists—one selected from the universe of all U.S.-listed ETFs, and one that excludes leveraged, inverse and volatility products.

Submerging Markets
The narrower list contains 15 products with losses ranging from 17% to more than 37%. The vast majority of those funds share one common characteristic—they are emerging market ETFs. In fact, 13 of the 15 worst performers are single-country emerging market funds.

Worst-Performing ETFs Of The Year (excluding inverse/leveraged/volatility)

Note: Data measures total returns for the year-to-date period through July 12.

Many stories have been written this year about the woes affecting emerging markets. The two largest EM funds, the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares Core MSCI Emerging Markets ETF (IEMG), are down 6% a piece so far in 2018 after rising by more than 31% 2017.

A strengthening dollar, rising interest rates and fears of a trade war have turned emerging markets on their heads in 2018.

While emerging markets as a whole is getting dragged lower, some countries are getting hit harder than others. These weaker links, which include Turkey, Brazil and Argentina, have turned into pariahs within the broader asset class.  Their plunging currencies have scared away foreign capital and made it increasingly difficult to service their large piles of dollar-denominated debt.

Within this group, the iShares MSCI Turkey ETF (TUR) is down 37.3%; followed by the VanEck Vectors Brazil Small-Cap ETF (BRF), with a 22% loss; and the Global X MSCI Argentina ETF (ARGT), with a 19.6% decline.

Biggest EM Countries Not Immune
Also doing poorly are ETFs tied to the two largest emerging markets countries, China and India. The former is struggling to contain a growing trade war between itself and the United States. A full-blown trade war could knock China’s GDP growth down by 2.3%, according to an analysis by UBS.

The Xtrackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS) and the CSOP MSCI China A International Hedged ETF (CNHX) are the worst performers among China funds this year, with losses in excess of 18%.

Meanwhile, some India ETFs, like the VanEck Vectors India Small-Cap Index ETF (SCIF) and the Columbia India Small Cap ETF (SCIN), are doing even worse, with both shedding about a quarter of their value this year.

Small cap Indian equities have sharply underperformed their large-cap counterparts in 2018 amid valuation concerns. Last year, SCIF and SCIN surged 67% each, double the return of broader India ETFs.

Also weighing on the group is forced selling by some Indian mutual funds, which have been required to comply with new rules aimed at simplifying fund categories for the average Indian investor.

Commodity Losers
In addition to the EM ETFs that dominate the worst-performers list are two other products, the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) and the iPath Series B Bloomberg Sugar Subindex Total Return ETN (SGGB).

REMX is another one of those ETFs that rocketed higher last year and is giving some of that back this year. In 2017, the fund soared 82.4%; so far in 2018, it’s down 21.7%.

Rare earths—a group of 17 elements used in the manufacturing of all sorts of products—were recently put on a list of $200 billion worth of Chinese goods that the U.S. could target with tariffs. If those tariffs go into effect, that could crimp demand for rare earths on the margin.

The other commodity-related fund among the worst-performers, SGGB, has lost 18.3% so far this year on the back of sagging sugar prices. Tepid demand growth and booming supply from the likes of India and Thailand have created a supply-demand imbalance in the sugar market, according to analysts. Sugar prices are close to three-year lows.

Inverse VIX ETFs Wiped Out
Pulling products from the entire universe of U.S.-listed ETFs reveals a completely different group of names than those already mentioned. Our second worst-performers list features ETFs with losses ranging from 49% to a whopping 90%.

It’s headlined by the likes of the REX VolMAXX Short VIX Futures Strategy ETF (VMIN) and the ProShares Short VIX Short-Term Futures ETF (SVXY).

Inverse VIX products were decimated in February after the Cboe Volatility Index (VIX) had its largest one-day increase ever, a 115.6% gain. Naturally, that wiped out much of the value of products that shorted futures tied to the index.

Though severely damaged, the two ETFs survived to live another day—unlike the VelocityShares Daily Inverse VIX Short Term ETN (XIV), which was forced to close. Both VMIN and SVXY now offer slightly different exposure to the VIX than they did before the February wipeout. SVXY only provides 0.5x inverse exposure to the VIX, while VMIN targets inverse exposure to mid-term VIX futures with 2-6 months left to expiration.

The rest of the all-encompassing worst-performers list includes products that bet against areas of the market that have done exceptionally well this year—think biotech, the FANG stocks and crude oil.

For a full list of the ETFs that make up this ill-fated group, see the table below:

Worst-Performing ETFs Of The Year (all-encompassing)

Note: Data measures total returns for the year-to-date period through July 12.

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