ETFs with 5-Year Losing Streaks

by on April 9, 2014 | ETFs Mentioned:

Since markets bottomed in March of 2009, few assets have let up in their relentless run, as the recent bull market has been one of the strongest in recent history. Still, while funds like SPY and DIA have been roaring forward, not all ETFs have been able to enjoy the same success. After taking a look at the three funds that were able to notch six year winning streaks, we now turn to the other side of the coin; below, are a couple of ETFs that have clocked in a five-year losing streak [for more ETF news and analysis subscribe to our free newsletter].

By losing streak, we mean that these two funds have had a negative annual return in every year since 2009, since the bull market began. After excluding any funds that launched after 12/31/2008 and any leveraged/inverse products, there were just two ETFs that have suffered this terrible fate.

DJ-UBS Natural Gas Subindex Total Return ETN (GAZ, C+)

Hitting the market in late 2007, GAZ has never been able to turn in a positive annual performance, as the cratering of natural gas prices has suffocated this ETF. Even its competition, the United States Natural Gas Fund (UNG, B-), was able to make gains in 2013. GAZ invests in Henry Hub Natural Gas futures on the NYMEX, so many would assume that it would closely match UNG; however, the issuer published investor guidance in mid-2012 that noted the following:

“Due to likely continued fluctuations in this premium, Barclays Bank PLC believes that the GAZ ETNs will not track the price of the underlying natural gas futures index in a consistent manner and therefore are currently not suitable for most investors. The secondary market for the ETNs has been volatile and unpre – dictable, and investors should not assume that the ETNs will continue to trade at a premium in relation to their intraday indicative value.”

Basically, GAZ got out of whack with its index, likely due to its much lower liquidity than a fund like UNG. As a result, the ETN has taken a hit, even as natural gas has recovered.

DB USD Index Bullish (UUP, A)

Chalk up a win for Ben Bernanke and the Fed when it comes to UUP’s losing streak. This ETF, which measures U.S. dollar futures, has struggled amid the Fed’s easy money policies and quantitative easing programs. As the Fed continued to print money to stimulate the economy, they simultaneously devalued the greenback, making life very difficult for UUP. Its five-year losing streak is not anything too major, as most currency funds are not designed to be held for extended periods of time, but should instead be traded. Still, UUP has found it impossible to find positive momentum and may continue to struggle with Yellen at the helm.

The Bottom Line

Despite the current bull market, there are still assets and products that have lagged far behind. This is a good reminder for investors to always keep an eye on the structure and behavior of a particular ETP as well as its overarching environment.

Follow me on Twitter @JaredCummans.

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Disclosure: No positions at time of writing.