Best And Worst Performing ETFs Of 2014

It’s time to look back to the best and the worst of 2014. Here, we’ll do a quick recap of the ETFs that rocked and flopped this year with the ups and downs in the global economy and resulting flow and ebb in the investing world.

It’s important to start off by saying that the U.S. economy delivered an all-star performance from the second quarter, leading the S&P (SPX) to soar and cross the 2,000 mark for the first time in history.

But all this happened after a cold snap in Q1 that left the country and its economy shivering. Also, a prolonged geo-political tension between the West and Russia following the Crimea annexation by the latter, sagging economies of the Euro zone, Japan and China, plus worries over the timing of first interest rate hike in the U.S. made the year an eventful one. The allure of income and safe investing was thus alive in 2014.

On the other hand, almost all commodities had an extremely choppy ride this year with the oil price retreating to five-year lows. Precious metals like gold and silver were also dark spots in the 2014 calendar.

Let’s take a look at three top and worst performing ETFs of the year so far.

 

Top Performers

PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ) – Up 50.2%

Global growth worries, apparent uncertainty in the Fed policy, spread of Ebola virus and geo-politics pushed the 10-year U.S. Treasury bond yield close to 2% this year despite the end of QE. This made ZROZ a top performer on the year.

The $94 million fund tracks the BofA Merrill Lynch Long Treasury Principal STRIPS Index, focusing on treasury principal STRIPS that has 25 years or more of final maturity. It focuses on long-term bonds with both effective maturity and effective duration of 24.24 years. ZROZ has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

iPath Dow Jones UBS Coffee ETN (JO) – Up 49.3%
 

Coffee made a remarkable comeback this year after a steep fall last year thanks to the weather and coffee leaf rust concerns which dented supplies. To add to this, consumption is fast brewing in major growing nations like Brazil, Vietnam and Colombia along with its already widespread use in First-World nations.

This took the coffee ETN to new heights. The note – which has amassed about $69 million in assets so far− charges investors 75 basis points a year in fees, and looks to follow the Dow Jones-UBS Coffee Index (read: Coffee ETFs Surge on Supply Concerns).

 

Worst Performers

C-Tracks on Citi Volatility Index ETN (CVOL) – Down 59.7%

Thanks to sturdy U.S. stock markets, volatility levels eased in 2014, barring occasional spikes. As a result, CVOL was hit the most. The note provides investors direct exposure to the implied volatility of large-cap U.S. stocks.

The benchmark combines a daily rolling long exposure to the third and fourth month futures contracts on the VIX with short exposure to the S&P 500 Total Return Index. The $9.6 million product charges 1.15% in annual fees.

Market Vectors Russia Small-Cap ETF (RSXJ) – Down 56.8%

Among country ETFs, Russia had the most chaotic journey this year. Geopolitical crisis, financial restrictions from the key trading partners, acute slide in the currency, soaring inflation, consecutive rate hikes and poor demographics punished the nation brutally this year. Among all the Russia ETFs, RSXJ was battered the most.

The product has small-cap stocks in its portfolio. Investors should note that small caps are believed to reflect the clear domestic picture. This $43.5 million product charges 67 bps in fees (read: Russia ETFs Crash: What Went Wrong in 2014?).

United States Brent Oil Fund (BNO) – Down 47.3%

Needless to say, oil ETFs would definitely have the worst ETF performers’ record. Oil price plunge and its contagion to various other asset classes literally horrified analysts and investors in the second half of the year. A supply glut along with the possibility of no production cut from OPEC and declining demand led both Brent and WTI crude prices to their five-year low levels (read: Oil ETFs Crash As Crude Touches Multi-Year Low).

This clearly explains BNO’s position in the worst three losers list. The fund is designed to track the daily changes in the spot price of Brent crude oil and has about $31 million in assets presently. It charges 75 bps in fees a year from investors.