Ten Worst ETF Performers Of 2011

by on December 22, 2011 | ETFs Mentioned:

Odds are that 2011 is a year many investors will be eager to forget. Ongoing uncertainty over Europe, combined with a frustrating employment situation stateside and even weakness among emerging markets has put many core asset classes in the red for the year. Most equity ETFs have struggled on the year, with major benchmarks having given back any gains that were generated in the early parts of the year.

Any declines in value is always tough to swallow, but the pain obviously increases with the magnitude of the loss. Unfortunately for some, a rather large chunk of the ETF universe has experienced big declines in 2011; through December 19, more than 350 non-leveraged ETPs had lost 10% of more year-to-date [see Looking Back At Our ETF Ideas For 2011].

Some of the biggest losers on the list are likely long-term dogs, focusing on asset classes that could see further declines in the future. But the list of the biggest declines could also include some opportunities to snap up asset classes with attractive long-term potential at a discounted price. Below, we profile ten ETFs that have struggled mightily in 2011 [for more ETF insights, sign up for the free ETFdb newsletter]:

10. Guggenheim Shipping ETF (SEA): Down 46%

This targeted ETF has gone off course so far in 2011, as the second incarnation of the shipping ETF has lost close to half of its value. Generally speaking, the shipping industry serves as a leveraged play on the global economy; when times are good demand for freight transportation is strong. But with raw materials demand from emerging markets slowing down and Europe going backwards, the need for shipping services has waned.

There might actually be reason to be bullish on SEA. The Baltic Dry Index, a measure of shipping costs, has continued to climb higher since bottoming out in January, perhaps reflecting strength in this corner of the market. Higher shipping lease rates should eventually translate into higher profits for shipping companies, which could be a nice boost to SEA in 2012.

9. C-Tracks ETN Citi Volatility Index Total Return (CVOL): Down 48%

This ETN from Citi has posted the most severe year-to-date decline in the Volatility ETFdb Category, the result of a unique methodology employed. The exposure offered by CVOL is multi-faceted; this ETN combines directional exposure to the implied volatility of large cap U.S. stocks through positions in third- and fourth-month futures contracts on the CBOE Volatility Index with short exposure to the S&P 500 Total Return Index [see also Low Volatility ETFs Attracting Big Inflows]. That worked well when volatility spiked during the summer, but over the longer term CVOL has struggled.

8. Market Vectors Egypt Index ETF (EGPT): Down 48%

This year has been an eventful one for Egypt, where the Arab Spring first took root after the overthrow of the Mubarak regime. The elimination of the long-time ruler is expected to be a long-term positive for the north African country, paving the way for increased integration into the global economy after decades of mismanagement. But the short term pains related to the political uncertainty have been dramatic, as EGPT’s losses have only deepened after post-revolution trading began [see our Africa-Centric ETFdb Portfolio].

7. Dow Jones-UBS Natural Gas Total Return ETN (GAZ): Down 49%

The odds of increased long-term usage of natural gas appear to be improving, thanks to some impressive technological breakthroughs that have made transportation more affordable and continued discoveries of new reserves. But prices haven’t held up–in large part because the supply of this fuel continues to grow at an astounding rate. Combine those fundamentals with persistent contango in futures markets, and the result is a dismal performance for this futures-based product.

6. ISE Global Platinum Index Fund (PLTM): Down 49%

This fund might be something of a surprise on this list; there is an expectation that mining firms have performed well thanks to the prolonged commodity rally that has continued even in a weak environment this year. But while gold and silver prices are way up, the other precious metals haven’t been quite as fortunate. Spot platinum prices have dropped about 20% on the year, and the value of the companies responsible for getting the metal out of the ground have been hammered as well.

5.WilderHill Clean Energy Portfolio (PBW): Down 52%

The track records of alternative energy ETFs are anything but clean. Once assumed to be “can’t miss” investment opportunities that were poised to thrive as oil dependence was eliminated, alternative energy is yet to deliver the returns many had hoped for. No corner of the market has been spared, as solar, wind, and nuclear power stocks have all been hammered in a brutal sell-off in the alternative energy space.

4. India Small Cap ETF (SCIF): Down 53%

The consensus is that India still maintains a promising long-term outlook, as the massive consumer base is expected to continue its expansion over the next several decades. But 2011 has been a step back on what is believed to be a path towards becoming the largest economy outside of China, as worries about rising inflation, crumbling infrastructure, and political corruption derailed the impressive growth story [see Evaluating India ETFs: Three Important Factors To Consider].

3. iPath Global Carbon ETN (GRN): Down 56%

GRN is one of the more bizarre products in the rapidly-expanding ETF universe; this ETN is linked to an index that consists of carbon-related credit plans. Currently, that index consists of only two: European Union Emission Trading Scheme (EU ETS Phase II) and Kyoto Protocol’s Clean Development Mechanism.

Fortunately, GRN’s freefall hasn’t meant big losses for many; this ETN has just over $1 million in assets [see What The Heck Is A Carbon ETN?].

2. Global X Uranium ETF (URA): Down 60%

The aftershocks of the tsunami that ravaged Japan earlier this year were felt in the portfolios of investors with exposure to the global nuclear power industry. In the aftermath of the disaster, many countries began to reevaluate the relative merits and risks of nuclear power, with some concluding that the potential for disaster outweighed the potential to achieve cheap, clean supply of fuel. Those decisions hammered the valuations of stocks engaged in the production of uranium, many of which are found in URA.

1. Market Vectors Solar Energy ETF (KWT): Down 67%

It wasn’t that long ago that analysts generally believed the solar power industry had a very bright future; now, it appears as if the sun is setting on this corner of the alternative energy market. Budget crises throughout Europe led to the reduction or elimination of badly-needed subsidies, and the technological advancements that were supposed to make the economics of solar power viable never really materialized [see Contrarian ETF Ideas: Investing In The ETF Dogs Of 2011].

Disclosure: No positions at time of writing.