It is just one example, but gold and silver miners and the exchange traded funds that hold them have provided investors with a memorable lesson in 2014.
That being that it is in fact worthwhile and profitable to dig among one year’s wreckage to find the potential leaders for the coming year. Mining ETFs have proven that in spades. As we noted on Tuesday, several of the best non-leveraged ETFs to this point in 2014 are mining funds, all of which spent significant time ranked among last year’s worst-performing ETFs. [Last Year’s ETF Laggards Surge in 2014]
The same can be said of rare earths and uranium ETFs as the Market Vectors Rare Earth/Strategic Metals ETF (NYSEArca: REMX) and the Global X Uranium ETF (NYSEArca: URA) have made the “trash to treasure” move in 2014. [Uranium ETF on Fire to Start 2014]
The same cannot be said of emerging markets ETFs. While India ETFs have not been too bad to start 2014, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) are off an average of 4.6% year-to-date. That number looks good compared to the dour performances turned by some single-country emerging markets funds.
Here is the factoid that sums up just how bad developing markets ETF have been to start 2014: Eight of the 10 worst non-leveraged ETFs through Jan. 21 are emerging markets funds. There are at least two elements making matters even worse for emerging markets ETFs. First, the iShares MSCI South Korea Capped ETF (NYSEArca: EWY), which acted as something of a shelter from the storm play in the latter half of 2013, is on the 10 worst list. [How to Bet on Asia in 2014]
Second, the dismal performances turned by country-specific funds this year are not confined to a particular region. Of the eight emerging markets funds on the 10 worst list, four provide exposure to Latin America, three to Asia and the other is the iShares MSCI Turkey ETF (NYSEArca: TUR).
Three of the LatAm funds on the 10 dogs list are single-country plays with the iShares Latin American 40 ETF (NYSEArca: ILF), which is heavily allocated to Brazil and Mexico, being the outlier. Troublesome is the fact that LatAm ETFs are struggling mightily in 2014 after several of the region’s equity markets were among the world’s worst last year. [Advisors Nibble at LatAm ETFs]
Commodities cannot bear all of the blame in 2014 because the iShares MSCI All Peru Capped ETF (NYSEArca: EPU), another example of a trash to treasure trade, is getting a lift from rising from precious metals prices after being the worst LatAm single-country ETF last year.
The first few weeks of 2014 have not been a total wash for investors with a thirst for exotic global markets. The iShares MSCI Frontier 100 ETF (NYSEArca: FM) has maintained its dominance over comparable emerging markets funds while the Market Vectors Vietnam ETF (NYSEArca: VNM) is higher by 14.2%.
10 Worst ETFs in 2014
Chart Courtesy: ETF Replay
Tom Lydon’s clients own shares of EEM.