Markets

The Top Performing ETFs Of 2016

Drew Voros

ETF.com Editor-in-Chief

After a series of macro surprises, 2016 became a breakout year for equities. It's a year in which the seven-year bull market in U.S. stocks resumed after pausing for several months due to concerns about China and an "earnings recession" for U.S. corporations.

But it wasn't just U.S. stocks that rallied. Emerging market equities made a comeback, with the MSCI Emerging Markets Index climbing almost 10% on the year. The same can be said about commodities; the S&P GSCI Spot Index jumped 26% this year.

As it turns out, emerging markets ETFs and commodity ETFs ended up being the best-performing funds of the year. Each of the top 10 ETFs of 2016 targeted either emerging market equities or commodity-related equities.

Returns for this group of nonleveraged/noninverse funds ranged from 58% to 122% in the year-to-date period through Dec. 21.

But it is important to keep it in perspective. For the past few years, emerging market and commodity stocks were decimated on the back of the China slowdown and other factors. Every fund on 2016's top 10 list was down in 2015 and 2014. With the exception of two, they were all down in 2013 as well. Thus, while 2016 may have marked the bottom for emerging market and commodity ETFs, most aren't anywhere near their all-time highs.

Metals & Miners

The title of best-performing ETF of 2016 goes to the PureFunds ISE Junior Silver ETF (SILJ), with its 121.7% gain. SILJ was up even more―as much as 280% at its highs―but the recent sell-off in silver and gold prices took a bite out of returns for miners.

In contrast to SILJ, which has been losing steam recently, the No. 2 ETF of 2016, the SPDR S&P Metals & Mining ETF (XME), has been gaining steam into year-end. XME was last trading up 114.5% year-to-date, with half of those gains coming since the Nov. 8 U.S. presidential election.

Also among the top 10, two single-country emerging market ETFs also made the list. The VanEck Vectors Russia Small-Cap ETF (RSXJ) spiked 103.6% this year, while the ProShares MSCI All Peru Capped ETF (EPU) gained 61.4%.

Innovation A Tough Sell

New ETF launches in 2016 have not met with much success. Of the 223 funds that launched this year, only 11 have cracked the $100 million mark. That’s only half 2015’s total.

There’s only one truly new idea in that group of 11: the SPDR SSGA Gender Diversity Index ETF (SHE). The runner-up WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM) added a variable currency hedge to a well-established index, but otherwise broke no new ground.

The picture looks even grimmer for new launches when you look at 2016 fund flows. In all, 84 ETFs attracted $1 billion or more this year, but only three of those were launched after 2013. Only two funds launched after 2013 gained $1 billion or more so far in 2016: Jeff Gundlach’s SPDR DoubleLine Total Return Tactical ETF (TOTL) and the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC).

Vanguard Cuts Fees

Mutual fund and ETF giant Vanguard has announced fee cuts on a number of its funds, including 11 ETFs, for the 2016 fiscal year ended in August.

Vanguard tends to raise and lower expense ratios based on a fund’s assets under management, as economies of scale mean the greater an index fund’s assets, the cheaper it is to manage.

Most of the reductions were related to Vanguard’s bond funds, with eight ETFs seeing their expense ratios fall by 3 basis points. Fixed-income ETFs throughout the ETF industry saw significant inflows this year. The firm’s three “Mega Cap” ETFs also saw their expense ratios lowered by 2 basis points each, and the health care sector ETF’s fee was raised by 1 basis point.

Drew Voros can be reached at dvoros@etf.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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