Among the worst-performing exchanged traded products, VXX has seen the biggest inflows over the previous three years, according to Colas. VXX has a three-year return of -94.7% but has raked in an amazing $4.8 billion of inflows, he points out.
The other worst performers include leveraged inverse ETFs that bet against stocks, precious metals and Treasury bonds.
Conversely, some of the best ETF performers are leveraged funds that take the bull side, rather than bearish bets.
“What can we take away from this admittedly — and deeply — counterintuitive data? First, remember that we are talking about the extremes here. These are the best and worst 3% of the ETF/ETP universe that have made it to their three year anniversaries. As such, the notion that investors pile into losing products isn’t a fair characterization of overall behavioral patterns,” Colas wrote.
“But there is a message in the jagged edges of the best-and-worst list we present: throughout the last three years of generally rising markets for stocks and other assets, investors have been white-knuckle scared of another meltdown,” the strategist added. “When money continues to flow into essentially ‘Insurance’ products rather than ‘Leveraged Long’ funds after a multi-year rally, it doesn’t really matter. It is a vote of no-confidence. You can take that as very bullish, or very bearish. But the truth, like these returns, clearly sits at one of these extremes.”