Worst Performing ETFs At Midyear 2015

'Boring’ markets send volatility ETFs sinking.

When it comes to this year's U.S. stock market, one of the most evident themes during the first half of the year was volatility−or more precisely, the lack thereof.

In fact, market movements at times were so boring that they made the record books. The S&P 500 moved less than 1 percent in each of the last nine weeks of the second quarter, only the fifth time that's ever happened.

Perhaps it's unsurprising that U.S. stocks took a bit of a breather. Heading into 2015, they had already climbed for six-straight years, fueled by record-low interest rates and soaring corporate earnings.

With the Fed signaling it would end its unprecedented zero-interest-rate policy sometime this year, and with earnings held down by a collapse in oil prices that hit the energy sector hard, the stock rally stalled.

Appropriately, the S&P 500 finished the first half of the year almost exactly where it began, up a mere 0.2 percent.

Volatility Sags

As stocks barely moved, volatility indicators tumbled. The popular CBOE Volatility Index (VIX), plunged from a high of 19.2 at the beginning of the year to as low as 11.9. Naturally, exchange-traded products tied to the VIX and other volatility indexes declined as well.

The C-Tracks Citi Volatility ETN (CVOL | F-67) led all losers, with a 43.8 percent loss, while the largest product in the space, the iPath S&P 500 VIX Short-Term Futures ETN (VXX | B-62), bled 36.2 percent.

Volatility products are perennially poor performers over the long term, as they suffer from the "contango effect" of rolling futures contracts over time—called decay—which eat away at returns.

First-Half 2015 Bottom Performers (%) ex-Leveraged & Inverse

Greece Fears Mount

Ironically, the one concern that may shake the stock market out of its low-volatility stupor also found itself on the worst-performers list. The Greek debt drama that has gone on for years headed toward a climax during the final week of June as the country defaulted on an interest payment to the International Monetary Fund.

With the country on the brink of economic disaster and poised to potentially fall out of the eurozone, the Global X FTSE Greece 20 ETF (GREK | D-63) plummeted, with the fund losing about 25 percent during the first six months of the year.

Commodities Continue To Fall

Rounding out the bottom-performers list for the first half of 2015 were a handful of commodity products. Evidently, after falling for four years in a row, the asset class still remains out of favor.

The worst of the bunch was the iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ | F-42), which was hit to the tune of 36.8 percent. Natural gas prices only fell by 1.1 percent in the period, and the more popular United States Natural Gas Fund (UNG | C-100) only lost 8.2 percent.

Much of GAZ's underperformance can be tied to a closing of the product's premium versus its net asset value. In January, the issuer Barclays said that "there had been another occurrence of persistent and material premium in the trading price" of GAZ to the tune of about 44 percent compared with the indicative value.

In turn, Barclays said that the ETN was "not suitable for most investors" at the time. By the end of the first half, the premium had disappeared.

Finally, two coffee ETNs found themselves on the worst-performers list. Traders speculated that supplies of the best-performing commodity of last year are in relatively good shape after being hit hard by Brazil's drought in 2014.