Market Overview

Banished: 2011's Biggest ETF Disappointments

With just one full trading day left in 2011, everyone is making a list of about what worked and what did not in 2011 and what investment themes may or may not prove profitable in the year ahead. Hey, we've even done a few of our own lists.

And with just one trading day left in the year, it's fair to say 2011 has been another good year for the exchange-trade products business. Even in a tough market environment, assets under management have grown and the number of new funds that have come to market in 2011 has been robust to say the least.

Still, there have been small signs that everything isn't perfect when it comes to ETFs. In an industry that is growing this much this fast, there are bound to be disappointments and 2011 brought a few.

For our list of this year's biggest ETF washouts, performance was not the sole determining factor of whether or not an ETF made the list. In fact, we're leaving some predictable suspects like the uranium ETFs off the list. Asset growth, volume and other factors were considered as we populated the list of 2011's Biggest ETF Disappointments.

In no particular order...

Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) REMX came to market late last year and today, the ETF has over $200 million in AUM and it's safe to say most investors know about this ETF. However, what they may know is that REMX has been an epic disappointment this year. The fundamental catalysts of restricted Chinese exports of rare earths and demand for rare earths in smartphones, tablets, cars, etc. was there for the most part, but REMX has tumbled 35% and things have gotten worse recently, not better. If this ETF falls below $14, watch out.

WisdomTree India Earnings ETF (NYSE: EPI) My how the mighty have fallen. The WisdomTree India Earnings ETF was a 2011 angel that fell back to earth hard in 2011. With one trading day left in the year, EPI is down 40% year-to-date and like almost every other ETF, EPI's chart is market by lows highs and lower lows. Today the ETF is in major technical danger. No one could have forecast 2011 would be this bad for this fund.

Direxion Daily Financial Bear Shares (NYSE: FAZ) Since we've already been critical of FAZ, we'll take it easy on the controversial ETF today. However, it should be noted that in a terrible year for bank stocks, FAZ is off almost 19%.

iShares Silver Trust (NYSE: SLV) OK, so it probably wasn't reasonable to expect SLV to replicate 2010's stellar run, but 2011 has been a disaster. It's even worse when considering ETFs backed by physical gold are up about 10% on the year. And worse than all that is SLV has shown no signs of improvement in recent weeks.

Market Vectors Gold Miners ETF (NYSE: GDX) Really, any gold miners ETF would be fine to put in this spot, but will go with the biggest. GDX is down more than 15% year-to-date while the iShares Gold Trust (NYSE: IAU) is up 10%. Enough said. Oh yeah, GDX recently violated critical support at $52 and unless the risk on trade comes back with a vengeance, this ETF and related fare could be in for more downside.

IndexIQ Hong Kong Small Cap ETF (NYSE: HKK) We figured this ETF would struggle because 2011 has been unkind to emerging markets, but we also thought it would survive and eventually thrive. That is not the case as HKK was recently shuttered.

ProShares UltraShort MSCI Europe (NYSE: EPV) Yes, we've picked on this one, too. However, this should have been the easiest trade of 2011: Short Europe. There's no such thing as a free lunch in the financial markets and leveraged ETFs such as EPV underscore that fact.

iShares MSCI Sweden Index Fund (NYSE: EWD) Maybe we're being a bit harsh by including the iShares MSCI Sweden Index Fund on this list and we that because there's still good reason to believe in the Swedish economy, its AAA credit and low debt. However, Sweden as represented by EWD should have been a safe haven for investors in 2011. Quite the contrary. The ETF has slid more than 17%. On the bright side, EWD has started to perk up lately and the yield of over 4% is enticing here.

PowerShares Financial Preferred ETF (NYSE: PGF) Maybe we're being a tad harsh again, but in a yield-starved environment, 2011 should have been a great year to be involved with preferred ETFs. PGF's biggest problem isn't that it tracks preferred stocks. It's the sector where all those preferred issues come from. The yield is almost 7.7%.

iShares MSCI Emerging Markets Financials Index Fund (Nasdaq: EMFN) Emerging markets. Bank stocks. Over 47% of an ETF's weight allocated to China, Brazil and India. It's easy to explain why EMFN has languished this year. For an iShares ETF, EMFN is small with just $3.1 million in AUM. The 7% yield is big and destined to get bigger. EMFN is too risky at the moment to play for a potential 2012 rebound.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Specialty ETFs New ETFs Emerging Market ETFs Best of Benzinga

 

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