Ten Of The Worst Performing ETFs Of The First Quarter

by on April 2, 2010 | ETFs Mentioned:

Although equity markets generally headed higher in the first quarter of 2010, there were a few funds that were not so lucky and became the early leaders in the Laggard of The Year race. The S&P 500 finished the quarter up close to 6%, but European markets stumbled in the wake of an on-and-off crisis in Greece. Moreover, cuts by cash-strapped governments to certain subsidies weighed on alternative energy industries. Below, we offer a list of equity funds that turned in less-than-stellar performances in the first quarter of the year. For investors looking to scoop up some value funds (as well as the contrarians out there), this list could give provide some inspiration.

1. Claymore/MAC Global Solar Energy Index ETF (TAN)

TAN, a fund tracking the global solar industry, was the biggest loser for the first quarter of 2010, sinking by 16.3%. The loss can be attributed to weakness in the price of oil and the desire of many governments to streamline their often bloated budgets.

Other solar funds that were down big in the first quarter include Market Vectors Solar Energy ETF (KWT).

2 iShares S&P Global Clean Energy Index Fund (ICLN)

ICLN, a fund tracking the broad alternative energy sector, also had a weak first quarter, posting a loss of 14.6% in the period. In addition to ICLN, other alternative energy ETFs that experienced weakness included PowerShares Global Clean Energy ETF (PBW) and Market Vectors Global Alternative Energy Fund (GEX).

3. PowerShares Global Wind Energy Portfolio (PWND)

Much like the other alternative energy ETFs, PWND sunk more than 13.7% as governments around the world have attempted to cut subsidies to this still-nascent sector from their budgets. Furthermore, a strong dollar has helped to keep the price of oil in check, limiting the demand for alternative sources of power. Other wind ETFs that have shown weakness in the first quarter of 2010 include the First Trust Global Wind Energy Fund (FAN).

4. iShares MSCI Spain Index Fund (EWP)

As debt issues in Greece and Portugal have sunk the euro, many investors are now turning to Spain as the next location for a sovereign debt crisis. EWP, a fund that tracks the Spanish equity market, has lost close to 10% in the first quarter on these concerns. For more information on the Spanish economy, see What Every Investor Ought To Know About The Spain ETF.

5. China Materials ETF (CHIM)

This surprising laggard tracks the S-BOX China Materials Index, a benchmark composed of Chinese companies engaged in operations in the materials sector. The fund is down close to 7.5% since its debut in mid January of this year (meaning that it technically wasn’t trading for the entire first quarter).

6. WisdomTree International Communications Sector Fund (DGG)

DGG focuses on dividend paying international communications firms and lost 6.9% in the first quarter. It should be noted that DGG was one of ten ETFs from WisdomTree to close its doors during the first quarter (see WisdomTree To Shut Down 10 ETFs). DGG’s last day of trading was March 24, so like CHIM it didn’t trade for the entire quarter. Still, the big loss reflects weakness in the global communications sector.

7. WisdomTree Europe Total Dividend Fund (DEB)

Europe ETFs were hammered by sovereign debt issues that dominated the global headlines during the first quarter of 2010. DEB was hit particularly hard, losing 6.4% before closing its doors in late March.

8. Market Vectors Brazil Small-Cap ETF (BRF)

One of the top performers of 2009 stumbled out of the gates in 2010. BRF more than doubled between its inception in May 2009 and the end of the year, but sunk by close to 6% in the first quarter. A stronger dollar has weighed on commodity prices, a negative development for resource-rich Brazil. For a closer look at BRF and other small cap international ETFs, see this Guide To Small Cap International ETFs.

9. WisdomTree International Financial Sector Fund (DRF)

One of the best performing domestic sectors thus far in 2010 has been the financials sector. Many names that have been beaten down in the crisis of 2008 have seen their shares surge in the past few months. However, DRF focuses on firms that pay dividends, and as such is not as exposed to the riskiest names in the finance sector which have seen their shares beaten down the most. Moreover, DRF maintains an international focus, lessening exposure to U.S. companies. This fund lost about 5.5% in 2010 before being shut down at the end of March.

10. iShares MSCI Italy Index Fund (EWI)

EWI focuses on the Italian equity market by tracking the MSCI Italy Index. Much like its Spanish counterpart, the Italian fund has been rocked by fears over sovereign debt issues and the mounting debt in the Mediterranean countries. The fund is down close to 4.6% in the first quarter of 2010.

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Disclosure: No positions at time of writing.