Following a year that saw some of the worst performances in recent memory, many asset classes have bounced back in 2009. But some have performed better than others, and as the year draws to a close we take a look at some of the best-performing ETFs. The year’s top gainers include a few of the largest and most-heavily traded funds, but the majority of those that made the list are lesser known ETFs likely off the radar of many ETF investors.
Each of the 900-plus ETFs currently included in the ETF Screener has been allocated to a single “best fit” ETFdb Category (see a complete list of ETFdb Categories here). While ETFs in the same ETFdb Category generally share similar objectives and risk/return profiles, they aren’t necessarily perfect substitutes for each other. The following list shows the fund from each ETFdb Category with this highest year-to-date return as of December 18, 2009.
ETFs that were launched in 2009 (there are more than 100 of them) weren’t considered for the “best performing” title — only those that have been trading for all of 2009 are eligible for inclusion. ETFdb Pro members can see how we utilize several of the funds on this list in the all-ETF Model Portfolios (if you’re not a Pro member yet, sign up for a free trial or read more here).
Market Cap Equity ETFs
Funds from these ETFdb Categories are often core components of investor portfolios, meaning that the selection of a top-performing fund from this category can have a meaningful impact on a portfolio’s bottom line.
- All Cap: In the broadest of equity ETFdb Categories, the Claymore/Zacks Dividend Rotation ETF (IRO) leads the way, gaining 43.8% so far this year (see IRO’s performance charts here). By comparison, the Vanguard Total Stock Market ETF (VTI), by far the most popular total stock market ETF, has added 25.2%.
- Large Cap Blend: In a category that includes the ultra-popular SPY, the Rydex/SGI S&P Equal Weight ETF (RSP) has been the biggest gainer of 2009. RSP is up almost 40% year-to-date, compared to about 22% for SPY. RSP holds all of the stocks in the S&P 500, but instead of a cap weighting methodology gives each component an equal allocation.
- Large Cap Growth: While the PowerShares QQQ Trust (QQQQ) has had a great year so far (up almost 50%), it trails the First Trust NASDAQ 100 Equal Weighted Index Fund (QQEW), which is up almost 55%. Similar to RSP, QQEW holds all the components of the NASDAQ 100 Index, but gives an equal weighting to each.
- Large Cap Value: The Dow Diamonds (DIA) may track one of the most widely-followed indexes in the world, but the best performing product in this category has been the relatively obscure ELEMENTS Benjamin Graham Value ETN (BVT), which has gained more than 75% in 2009.
- Mid Cap Blend: Scoring yet another point for alternative weighting methodologies, the RevenueShares Mid Cap Fund (RWK) has gained about 48.8% this year, putting it well ahead of the iShares S&P MidCap 400 Index Fund (IJH, up 34.3% this year). For a closer look at revenue-weighting strategies, see this feature.
- Mid Cap Growth: The Rydex/SGI S&P MidCap 400 Pure Growth ETF (RFG) has gained about 57% in 2009, putting it well ahead of the iShares Russell MidCap Growth Index Fund (IWP, up 42.6%), which is the largest ETF in this category. For a look at how “pure style” ETFs work, see this feature.
- Mid Cap Value: Further highlighting the potential benefits of pure style ETFs is the Rydex/SGI S&P MidCap 400 Pure Value ETF (RFV), which is up 53.1% in 2009, compared to the 30.1% gain for the iShares S&P MidCap 400 Value Inedx Fund (IJJ).
- Small Cap Blend: The PowerShares FTSE RAFI U.S. 1500 Small-Mid Portfolio (PRFZ) has gained 52.1% so far this year, outpacing the much larger and more popular iShares Russell 2000 Index Fund (IWM), which is up 24.3%.
- Small Cap Growth: The SPDR DJ Wilshire Small Cap Growth ETF (DSG) is up about 42.4% so far in 2009, making it the top-performing small cap growth ETF.
- Small Cap Value: Ben Graham has been dead for years, but his investment strategies continue to deliver big returns. The ELEMENTS Benjamin Graham Small Cap Value ETN (BSC) has gained almost 63% in 2009.
Sector Equity ETFs
For investors looking to tilt their portfolios towards (or away from) certain industries, sector ETFs are extremely popular. U.S. investors looking to overweight a certain part of the economy often have a number of ways to do so, with numerous ETFs targeting specific sectors. But, as shown below, some of these ETFs have performed much better than others in 2009:
- Communications: The Vanguard Telecom ETF (VOX) has gained 26.6% this year, making it the best performer and also the cheapest (the fund has an expense ratio of only 0.25%).
- Consumer Discretionary: The SPDR S&P Retail ETF (XRT) has delivered huge returns this year, gaining 72.6% so far in 2009 (see XRT’s fact sheet here).
- Consumer Staples: The WisdomTree International Consumer Non-Cyclical Sector ETF (DPN) has added 28.8% so far this year, outpacing several domestic ETFs focusing on consumer staples companies.
- Energy: With 35 ETFs, the energy ETFdb Category is one of the most crowded. The Market Vectors Coal ETF (KOL) has been the best energy-related fund in 2009, gaining more than 130% (which makes it one of the top ten equity ETFs of the year).
- Financials: Most financials funds have bounced back from a dismal 2008 with big gains in 2009. The iShares Dow Jones U.S. Broker-Dealers Index Fund (IAI) leads this sector, gaining 37.9% thus far in 2009.
- Health & Biotech: Two ETFs from First Trust have delivered the biggest gains in this ETFdb Category this year, with the Health Care AlphaDEX (FXH) and the AMEX Biotech Index Fund (FBT) adding 48.9% and 39.6%, respectively.
- Industrials: More than half the funds in this ETFdb Category have added at least 30% this year, but most do not come close to the Market Vector Steel ETF (SLX), which has gained 104% in 2009.
- Miscellaneous Sectors: In a “catch all” category that includes various sector-specific ETFs, the PowerShares Dynamic Media Portfolio (PBS) has been stellar, gaining 58.6% on the year.
- Technology: Tech ETFs have been among the biggest gainers in 2009, with 18 of the funds in this ETFdb Category adding at least 50% in 2009. The SPDR S&P Semiconductor ETF (XSD) has led the way, gaining 87.4%.
- Transportation: The PowerShares Global Progressive Transportation Portfolio (PTRP) has only about $4 million in assets, but it may not fly under the radar for much longer: the ETF has gained 45% so far in 2009, making it the top-performing transportation ETF.
- Utilities: Another PowerShares ETF is the big winner in this ETFdb Category, with the Global Emerging Markets Infrastructure Portfolio (PXR) gaining 80.9% year-to-date.
International Equity ETFs
Investors have begun shifting their assets towards international equities, drawn by attractive returns and reduced risk relative to many domestic stocks. As shown below, many foreign funds have delivered big returns in 2009, rewarding investors who have shed the “home country bias” towards U.S. stocks.
- Asia Pacific Equities: With a median year-to-date return of more than 60%, this ETFdb Category has been one of the highlights in 2009. Indian equities have enjoyed a particularly good year, with the iPath MSCI India Index ETN (INP) adding 93.9% (see INP’s technicals here).
- China Equities: With almost $10 billion in assets, the iShares FTSE/Xinhua China 25 Index Fund (FXI) is larger than the other 14 ETFs in this ETFdb Category combined, but it has been in the shadow of the Claymore/AlphaShares China Small Cap ETF (TAO) this year. TAO has added 90.7% on the year, more than twice the gains delivered by FXI.
- Emerging Market Equities: Diversified emerging markets ETFs have seen huge cash inflows in 2009, becoming a core holding for many investors looking to lessen exposure to U.S. equity markets. But the biggest winners have been country-specific emerging markets ETFs, led by the Market Vectors Russia ETF (RSX) which has gained more than 135%.
- Europe Equities: European equities have been all over the board in 2009, with some economies enjoying sound recoveries and others still mired in prolonged downturns. The iShares MSCI Austria Index Fund (EWO) has been the best in this ETFdb Category, gaining 52.7% on the year.
- Foreign Large Cap Equities: Every ETF in this category is in the black for 2009, led by the iShares MSCI Israel Capped Investable Market Index Fund (EIS), which has gained almost 75%.
- Foreign Small & Mid Cap Equities: Every fund in this ETFdb Category has gained more than the S&P 500 this year, including the PowerShares FTSE RAFI Developed Markets ex-U.S. Small Cap Portfolio (PDN), which is up 47%.
- Global Equities: Among ETFs offering diversified global exposure to both developed and emerging economies, the Claymore/BNY Mellon International Small Cap LDRS ETF (XGC) has had the best year, gaining 57.2% so far in 2009.
- Japan Equities: Japan has struggled to get its economy on track in 2009, trailing far behind many other Asian economies. The SPDR Russell/Nomura Small Cap Japan ETF (JSC) has added only 3.1% this year, but that’s enough to make it the top performer in this ETFdb Category (see JSC’s fundamentals here).
- Latin America Equities: Boosted in part by Rio’s claim to the 2016 Olympics, the iShares MSCI Brazil Index Fund (EWZ) has gained 111% in 2009.
Fixed Income ETFs
Fixed income investing is a critical component of any investor portfolio, delivering valuable stability during times of volatility in equity markets. After outperforming stocks in 2008, most bond ETFs enjoyed strong gains in 2009 as well:
- California Munis: The PowerShares Insured CA Municipal Bond Portfolio (PWZ) has gained 9.7% so far this year.
- Corporate Bonds: Boosted by falling interest rates, the SPDR Barclays Capital Long Term Credit Bond ETF (LWC) has added 17.2% in 2009.
- Emerging Market Bonds: The PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) has gained 26.1% in 2009, making it one of the top performers among fixed income funds.
- Government Bonds: Most Treasuries have struggled so far in 2009, with the best ETF in this Category being the WisdomTree U.S. Current Income Fund (USY, up 1.8%).
- High Yield Bonds: The SPDR Barclays Capital High Yield Bond ETF (JNK) has led junk bond ETFs, gaining 20.1%.
- Inflation Protected Bonds: TIP may be the most popular, but the SPDR DB International Government Inflation-Protected Bond ETF (WIP) has been the biggest gainer, adding 17.4% year-to-date.
- International Government Bonds: The SPDR Barclays Capital Short Term International Treasury Bond ETF (BWZ) is up 11.1% in 2009.
- New York Munis: The PowerShares Insured NY Municipal Bond Portfolio (PZT) has gained 12.3% so far on the year.
- Preferred Stock/Convertible Bonds: The iShares S&P U.S. Preferred Stock Index Fund (PFF) has returned 24.9% this year.
- Total Bond Market: By far the smallest fund in this ETFdb Category, the Claymore U.S. Capital Markets Bond ETF (UBD) has gained 6.5% this year.
The rise of the ETF industry has made the “fourth asset class” available to more investors than ever before. There are dozens of funds now available, including both resource-specific ETFs and diversified ETFs offering exposure to a basket of commodities.
- Agricultural Commodities: The E-TRACS UBS Bloomberg CMCI Agriculture ETN (UAG) has added 18.7% on the year (see UAG’s holdings here).
- Diversified & Miscellaneous Commodities: Sugar has surged in 2009, and the iPath Dow Jones-UBS Sugar Total Return ETN (SGG) is up more than 81% so far this year.
- Metals: Prices of industrial metals have soared in 2009 as manufacturing activity has recovered significantly. The iPath Dow Jones-UBS Lead Total Return ETN (LD) has benefited the most, gaining 121% so far this year.
- Oil and Gas: Rises in crude oil prices have pushed up many ETFs in this ETFdb Category, but none more so than the United States Gasoline Fund (UGA), which is up almost 75%.
- Precious Metals: Gold’s tremendous rise has been one of the biggest stories of 2009, but the biggest gains in this ETFdb Category have come from a platinum and silver ETF. The iPath DJ-UBS Platinum ETN (PGM) is up 57.6%, while the E-TRACS UBS Bloomberg CMCI Silver ETN (USV) has gained 58.2%.
Real Estate and Currency ETFs
Several real estate and currency ETFs have delivered big returns in 2009, rewarding investors who have made allocations to these alternative asset classes that many have elected to avoid.
- Real Estate: This ETFdb Category has performed much better this year than last, led by the First Trust S&P REIT Index Fund (FRI, up 22.7%).
- Global Real Estate: Highlighting the huge gap between domestic and international real estate markets, the Claymore/AlphaShares China Real Estate ETF (HAO) has gained 68.1% so far this year.
- Currency: Many emerging markets have seen demand for their currencies surge this year. Two WisdomTree ETFs, the WisdomTree Dreyfus Brazilian Real Fund (BZF) and South African Rand Fund (SZR) have gained 30.8% and 31.8%, respectively.
Most asset classes have delivered solid gains in 2009, which translates into generally poor performance for inverse ETFs. As shown below, “bear ETFs” have had a rough go of it this year:
- Inverse Commodities: The PowerShares DB Agriculture Short ETN (ADZ) has lost 8.9% this year, making it the best performer in the group.
- Inverse Equities: By losing only 23.0% this year, the ProShares Short Dow 30 (DOG) is the best in this ETFdb Category.
The unprecedented volatility of 2008 led to poor results for many leveraged ETFs, but as normalcy returned to the markets in 2009, many leveraged ETFs have delivered big gains. Although most leveraged ETFs maintain a daily investment objective, it is interesting to note which have gained the most over the entire year (see a separate list of the year’s top leveraged ETFs here).
- Leveraged Commodities: The PowerShares DB Base Metals Double Long ETN (BDD) has gained 205% in 2009, making it one of the biggest gainers among all ETFs.
- Leveraged Currency: Despite struggling recently, the Market Vectors Double Long Euro ETN (URR) is up 3% on the year.
- Leveraged Equities: The Direxion Technology Bull 3x Shares (TYH) has gained an impressive 167% this year, dispelling the myth that leveraged funds always lose value over extended holding periods.
- Leveraged Real Estate: The Direxion Real Estate Bull 3x Shares (DRN) has only been trading since July, but has gained more than 115% since inception.
Best Of The Rest
Among the other ETFdb Categories, the top performers include:
- Target Retirement Date: The iShares S&P Target Date 2040 Index Fund (TZV) has gained 28.8% so far this year.
Disclosure: No positions at time of writing.