ETF Performance Report: Q3 and September | ETF Trends

After touching new highs, the broad equities market and stock exchange traded funds ended September on a more solemn note, weakening on geopolitical tensions and the Federal Reserve’s inclination toward monetary tightening.

The Dow Jones Industrial Average rose 1.3% over the third quarter. Meanwhile, the Nasdaq Composite increased 2.5% and the S&P 500 added 0.9%.

The top non-leveraged performers over Q3 include the ELEMENTS Linked to Spectrum Large Cap U.S. Sector Momentum Index (NYSEArca: EEH) up 82.9%, Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap Fund (NYSEArca: ASHS) up 35.7% and iShares MSCI Qatar Capped ETF (NasdaqGM: QAT) up 19.7%.

EEH tracks an index based on the relative weights of the sub-indices within the S&P 500 Index and follows a momentum strategy. Accordingly, the index overweights sub-indices that outperform the S&P 500 while under-weighting under-performing sub-indices. After the monthly surge, the exchange traded note now trades at a wide disparity to its net asset value, trading around a 56.6% premium to its NAV, according to Morningstar.

Chinese A-shares ETFs have attracted a lot of attention, providing retail investors with the ability to access the Chinese stock market directly instead of relying on Chinese company stocks traded on New York or Hong Kong stock exchanges. A decision by Chinese regulators to expand its renminbi qualified foreign institutional investor (RQFII) that allows foreign investors access to stocks traded on China’s mainland also helped fuel a rally in ETFs holding A-shares equities. [China RQFII Expansion a Boon for A-Shares ETFs]

Qatar was one of the first Middle East countries to earn an emerging markets promotion from MSCI. The country had previously been classified as frontier markets. In late May, Qatar was added to the MSCI Emerging Markets Index. QAT has bounced back after the late July sell-off.

At the bottom of the pack, the worst performing non-leveraged funds over the past three months include the Global X Silvers Miners ETF (NYSEArca: SIL) down 23.6%, PureFunds ISE Junior Silver Small Cap Miners/Explorers ETF (NYSEArca: SILJ) down 23.3% and iPath Grains Total Return Sub-Index ETN (NYSEArca: JJG) down 23.0%.

Over the past month, the Dow was down 0.2%, the Nasdaq declined 1.6% and the S&P 500 was 1.3% lower.

Markets remained relatively range bound over July, swinging back-and-forth, as investors weighed geopolitical volatility overseas against stronger economic data. Stocks rose early, with the Dow breaking above 17,000 for the first time, but profit taking pulled down on equities after the record run up.

After stumbling in July, U.S. equities rallied to new highs in August, with the S&P 500 index closing above 2,000 for the first time.