The S&P 500 is up 23.3% year-to-date, but scores of broad-based, or so-called market, exchange traded funds have done even better.
Whether it has been an equal-weight ETF, one that is benchmarked to an intelligent index, a fund comprised of spin-offs or companies that eagerly repurchase their own shares, there is no dearth of market-based ETFs that outperformed traditional indices this year. [Market Shrinkage Helping Some ETFs]
Some have a legacy of outpacing the usual broader market benchmarks. As we discovered when we examined how some of 2012’s best sector ETFs performed in 2013, we found that some of 2012’s best market ETFs repeated their year ago feats this year. [Some of 2012’s Best Sector ETFs Kept Soaring in 2013]
The examination of how 2012’s best market ETFs fared in 2013 starts with an ETF that has risen noticeably in popularity. All 2012 data courtesy Dorsey Wright & Associates.
First Trust US IPO Index Fund (NYSEArca: FPX)
2012: 28.9%
2013: Up 38.2%
Comment: FPX has soared this year and a lot of the fund’s success has to do with its index construction that allows the ETF to hold stocks that are up to 1,000 past their IPO date. Yes, the 10.2% weight to Facebook (NasdaqGM: FB) has certainly helped, but so has FPX’s allocations to several successful spin-offs such as Phillips 66 (NYSE: PSX) and Marathon Petroleum (NYSE: MPC). FPX has a new rival in the form of the Renaissance IPO ETF (NYSEArca: IPO), which focuses more on true IPOs.
PowerShares Global Listed Private Equity Portfolio (NYSEArca: PSP)
2012: 26.6%
2013: Up 20.1%
Comment: PSP probably will not equal its 2012 performance, but the ETF has been solid in 2013. Not every investor can gain access to a private equity firm, but PSP and rival funds help simulate that endeavor. More importantly, PSP is one of the more unique and highest sources of yield investors can find among equity-based ETFs. The ETF has a trailing 12-month yield of 9.8%. [Ten ETFs with the Highest Dividend Yields]
Guggenheim Spin-Off ETF (NYSEArca: CSD)
2012: 26%
2013: Up 45%
Comment: Speaking of spin-offs, CSD is an ETF entirely dedicated to that concept. And it is one of the ETF’s on this list that has a long-standing history of outperforming the S&P 500, something CSD has done every year except for one dating back to 2007. CSD has also benefited this year from a bias toward small- and mid-cap names.
UBS ETRACS Wells Fargo Business Development Company Index ETN (NYSEArca: BDCS)
2012: 23.5%
2013: Up 4%
Comment: BDCS has held up fairly well even as interest rates have risen because BDCs have taken steps to shelter against rising rates. The firms have structured about 60% of their assets into floating-rate investments. The ETN yields almost 7%.
Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV)
2012: 22.9%
2013: Up 38.5%
Comment: Investors are still favoring value over growth and RPV has made that preference worth their while with an almost 39% gain this year. Although RPV is more concentrated than many broad market ETF (it is home to just 110 stocks), no individual holding gets a weight of more than 3.6%. Financial services is by far the largest sector weight at 35%, nearly triple the allocation granted to the energy sector.
ELEMENTS Linked to the Morningstar Wide Moat Focus Total Return Index (NYSEArca: WMW)
2012: 22.5%
2013: Up 23.1%
Comment: WMW is the ETN version of the popular Market Vectors Wide Moat ETF (NYSEArca: MOAT). MOAT is also up nearly 23% this year, indicating that the wide moat approach, either by ETF or ETN, can work for investors.
Guggenheim Wilshire Micro-Cap ETF (NYSArca: WMCR)
2012: 21.1%
2013: Up 37.5%
Comment: Some so-called micro-cap ETFs are finding it difficult to find enough true, legitimate micro-caps, but the average market value of WMCR’s 953 holdings is $252 million, which is close to micro-cap territory. Given the run-up in smaller stocks this year, WMCR’s end of third quarter P/E of 13.2 is surprisingly low.
Guggenheim S&P Smallcap 600 Pure Value ETF (NYSEArca: RZV)
2012: 19.7%
2013: Up 34%
Comment: Again, investors have preferred value to growth since the market rally started in earnest several years ago and that has also been the case at with small-caps. Although RZV is a value spin on small-caps, it is not heavily allocated to low-beta sectors. Discretionary, industrial and technology names combine for about 62% of the ETF’s weight.
UBS ETRACS S&P 500 Gold Hedged Index ETN (NYSEArca: SPGH)
2012: 19.7%
2013: Down 9.3%.
Comment: SPGH gives investors exposure to the S&P 500 Gold Hedged Index simulates the combined returns of investing equal dollar amounts in the S&P 500 and COMEX gold futures contracts. The ETN does well when both gold and stocks do well. Of course, that has not been the case this year. SPGH has not traded yet this week.
Powershares Dynamic Market Portfolio (NYSEArca: PWC)
2012: 18.9%
2013: Up 33.9%
Comment: As a smart beta ETF, PWC looks to beat the S&P 500 and Russell 3000, something the unheralded fund has done with ease this year, over the past year and over the past three years. Although PWC is unheralded among smart beta ETFs, its broad market appeal could be attractive to professional investors looking to increase their exposure to smart beta/intelligent index ETFs. [Institutions to Ratchet up Use of Smart Beta ETFs]