The Surprising Connection That The Worst Performing ETF’s Share

When is enough, enough? That’s the question you might be repeating to yourself if you’re a Gold Bull (physical, futures, or otherwise). Or maybe, that’s what you might be thinking if you’re invested in a long Gold ETF. Upon surfing the interwebs for useful financial commentary and statistics, we stumbled upon the Worst 10 ETF performer’s YTD from Index Universe… and can you guess what most of them have in common?

Worst 10 ETF's YTD(Disclaimer: Past performance is not necessarily indicative of future results)
Table Courtesy: Index Universe

Five of the ten worst performers in 2013 are Gold ETF’s (4 of those Gold Miners ETF’s which we’ve discussed before here), two are Silver ETF’s (which from a commodity standpoint is highly correlated to gold), with the remaining three short VIX ETF’s. The range of the top ten was in between -43% and -56%. Ouch. Hopefully, most of those investors got out before Gold started turning bear, but there have to be some investors in the ETF, or well… it wouldn’t exist.

On the futures side of things… Gold has consistently dropped more than -26% since the start of 2013 (Disclaimer: past performance is not necessarily indicative of future results). That’s nothing to shrug off… but if you’re a frequent reader of our blog, you would know that the managed futures world isn’t concerned with a falling or rising gold futures, because trend following has the ability to go both long and short, and -26% performance over almost a year is definitely a short trend.

Moreover, while the benefits of passive indexing for equity etfs are well documented, it is our belief that investors are much better served getting commodities exposure through an actively managed CTA product (aka trend following) then a simple buy and hold approach…the scary numbers above are exhibit 1A. Plus ETF products  like USO and UNG that are tied to futures markets rather than actual physical commodities are even worse off as they have the potential to lose (due to the cost of rolling futures positions) even when the markets are moving favorably aka higher.

We’d like to point out it may appear we are harping on ETF’s the past couple of days with our latest post, “Nobody ever lost money in a Spreadsheet.” We don’t dislike ETF’s…  and it would only be fair to show the Top Ten ETF’s of 2013.

Top Ten ETF's YTD
(Disclaimer: Past performance is not necessarily indicative of future results)
Table Courtesy: Index Universe










Comments

  1. ETF’s or ETN’s, there is a difference… ETF’s follow a cash market, ETN’s track the futures and therefore have diluted performance due to cost of carry in most cases. XIV should be one of the top performing ETN’s, not in the list… it’s up 99% YTD and in the inverse of VXX, it is an inverse of VIX ETF and therefore has an option selling return profile due to the VRP…..

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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

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The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

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