3-Year Review: Best & Worst ETFs In Each Asset Class

by on July 24, 2013 | Updated July 30, 2013 | ETFs Mentioned:

Over the last three years, Wall Street has witnessed a tremendous shift in the investment environment. Investors are slowly adopting riskier appetites as they continue to recover from the 2008 financial crisis, allowing bullish momentum to become a more dominant force in the markets. But while most asset classes have fared relatively well over the years, some have posted both hits and misses  [see 25 Wild ETF Charts From 1H 2013].

Below, we highlight a handful of ETFs across each asset class that have surged over the past three years, as well as those that have struggled to keep up with Wall Street’s quick pace (note that inverse and leveraged ETFs are excluded from this list – data as of 7/23/13):

Equity ETFs: Biotechs and Pharma Come Out on Top, Solar Struggles

Though the Equity ETF space covers multiple industries, biotechnology-targeted funds have delivered stellar returns over the trailing 3-year period; Van Eck’s Market Vectors Biotech ETF (BBH, B-) has gained an incredible 165%. Solar Energy ETFs, however, have struggled to gain traction – both KWT and TAN have lost around 60%.

Bond ETFs: Convertable and Junk Bonds Deliver, Treasuries and Australia Bonds Fall Short

In the fixed income universe, lower-rated, high-yield bond funds showed strong returns over the last three years, though State Street’s Convertible Bond ETF (CWB, A) came out on top, gaining nearly 35%. The Australia & New Zealand Debt Fund (AUNZ, A) and two short-term Treasury funds, however, came in at the bottom of the barrel [see 8% Yield ETFdb Portfolio].

Commodity ETFs: Gasoline, Palladium, And Brent Catch Fire, Carbon And Natural Gas Tumble

On the commodity front, U.S. Gasoline (UGA, B-) and Brent crude oil (BNO, A) came in as the biggest winners over the last three years. Physical Palladium Shares (PALL, A) also delivered stellar returns, rising more than 63%. Not surprisingly, the Global Carbon ETN  (GRN, C) and two natural gas funds took significant hits.

Alternative ETFs: Buy-Write And 130/30 Strategies Deliver, Volatility And Long-Short ETFs UnderperformBest & Worst Performers

Though popularity among alternative ETFs has struggled to gain ground, several noteworthy strategies have been able to deliver meaningful returns over the trailing 3-year period. The Large Cap Core Plus ETF (CSM, A), which utilizes a 130/30 strategy, was this asset class’s best performing fund. Another 130/30 fund (JFT) and the S&P 500 Buy-Write ETN  (BWV, C) also posted double digit returns.

Considering how bullish momentum has re-emerged in recent years, it is not too surprising to see two volatility funds (VXX and VXZ) as the worst performers. The S&P CTI ETN  (LSC, A), which applies a long/short strategy to commodity futures, also struggled over the last three years.

Multi Asset ETFs: Long-Dated Target Retirement and “Aggressive” Funds Gain Momentum, Short-Dated Target Retirement and “Conservative” ETFs Eke Out Small Gains

Over the trailing 3-year period, every Multi Asset ETF managed to post positive gains, though DBX Strategic Advisors’ longer-dated Target Retirement Funds delivered the highest returns. The issuer’s shorter-dated funds, however, did not post as high of returns. iShares’ Aggressive Allocation ETF (AOA, B+), was also one of the top performers, while its counterpart which follows a more conservative strategy (AOK) also posted a relatively strong performance (20%), though it still fell towards the bottom of the barrel.

Real Estate ETFs: Retail And Residential Funds Soar, Mortgage and Global Options Post Modest Gains

Like with Multi Asset ETFs, every real estate fund delivered strong returns over the last three years as housing data continues to show encouraging signs. Coming out on top were the Retail (RTL), REIT (VNQ) and Residential  (REZ) funds. Chinese and global real estate, however, did not post as lucrative returns as their domestic counterparts [see Head-To-Head: Real Estate Industry ETFs].

Currency ETFs: Krona, Ausi Dollar, And G10 Currencies Come Out On Top, Yen and Rupee Falter

In currencies, the Sweedish Krona (FXS) and Ausi Dollar (FXA) fared well over the trailing 3-year period. Powershares’ DB G10 Currency Harvest Fund (DBV, A-), which tracks currency futures contracts on certain G10 currencies, also posted a strong performance. The Japanese Yen (JYN and FXY) and Indian Rupee (INR), however, lost ground against the dollar [see Single Country ETFs: Everything Investors Need To Know].

Preferred Stock ETFs: Financials Post Stellar Returns

Across the board, preferred stock ETFs have delivered strong gains over the last three years, with the Financial Preferred Portfolio (PGF, A-) rising more than 27%.

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Disclosure: No positions at time of writing.