With just two trading days left in 2019, the SPDR S&P 500 ETF SPY, the world's largest exchange traded fund, is higher by 29.19% this year, meaning the S&P 500 is on pace for its best annual performance since 1997.
Specific to the ETF industry, there are more 2019 superlatives, including the ascent to over $4 trillion in combined assets under management in the U.S. and more than $6 trillion on a global basis.
Roughly 240 exchange traded products, including ETFs and exchange traded notes (ETNs), debuted in the U.S. this year, boosting the domestic ETP population to over 2,400. That's despite a massive number of closures, and an indicator the industry is continuing its maturation process.
With stocks being strong this year, plenty of ETFs offered boffo performances. As our list below indicates, not all of the top performers were equity-based funds.
To build this list, we screened for ETFs up at least 50% in 2019 and stripped out the leveraged products.
The list turned up 75 ETPs that are up at least 50% this year, but when excluding leveraged funds, it dwindles to 17. Without further ado, here are the top five non-leveraged ETFs of 2019.
SPDR S&P Semiconductor ETF (XSD)
As you may have heard, semiconductors were the best-performing industry of the past decade, with the widely followed PHLX Semiconductor Index more than doubling the returns of the S&P 500 over that period. This year, chip stocks have been on fire, with four of the five domestic semiconductor ETFs posting gains in excess of 60%.
The battle for top honors about chip ETFs is coming down to the wire, as the SPDR S&P Semiconductor ETF XSD is up 65.8%, a modest advantage over the 65.4% returned by the VanEck Vectors Semiconductor ETF SMH.
Give XSD some credit. Often overlooked in the chip ETF discussion, the $513-million fund equally weights its components, so its' dominated by this year's stars such as Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA.
Aberdeen Standard Physical Palladium Shares ETF (PALL)
Up 51.05% year-to-date, the Aberdeen Standard Physical Palladium Shares ETF PALL isn't among the top five ETFs overall simply because it's not a semiconductor or clean energy fund — but it is this year's best-performing, non-leveraged commodities fund.
The white metal recently topped $2,000 per ounce, making it more valuable than gold, but some volatility has crept into PALL and it declined last week. No ETF, commodities or otherwise, moves up in a straight line.
“Palladium has surged to unprecedented levels in 2019 as tighter emissions rules spurred demand, while supply hasn’t yet been able to respond. Citigroup Inc. forecasts the move upward now has the potential to see prices gain to $2,500 in the first half of next year. Power outages in major producer South Africa hurt mine operations this month, fueling gains,” according to Bloomberg.
Virtus LifeSci Biotech Clinical Trials ETF (BBC)
In what has, until recently, been a rough year for the health care sector, the Virtus LifeSci Biotech Clinical Trials ETF BBC has been a consistent standout. Up more than 66% this year, BBC is easily the star among non-leveraged health care ETFs in 2019.
BBC's holdings are primarily companies with drugs in early stage trials, so the fund's success is usually levered to Food and Drug Administration approvals. With many of the fund's components being small-cap names, the possibility exists for larger pharmaceuticals and biotechnology companies to acquire a BBC holding.
Those catalysts could be at play again in 2020, as could a return to leadership by small caps that would benefit BBC.
Invesco Solar ETF (TAN)
Over the past three years, the Invesco Solar ETF TAN is higher by 89.4%, defying the logic that solar stocks need a Democrat in the White House to thrive.
That run includes a gain of almost 67% this year, which is easily enough to earn the oldest and largest solar ETF a place on this list.
TAN tracks the MAC Global Solar Energy Index. The benchmark “is comprised of companies in the solar energy industry. The index is computed using the net return, which withholds applicable taxes for non-resident investors,” according to Invesco.
The combination of easing trade tensions between the U.S. and China, TAN's two largest geographic weights; declining renewable costs and increased corporate adoption position TAN for more upside in 2020, though it may not replicate 2019's showing.
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU)
Not only does the U.S. Global GO GOLD and Precious Metal Miners ETF GOAU lay claim to being one of this year's best non-leveraged ETFs, it's making a strong case to earn more attention in the gold miner ETF conversation.
GOAU's 2019 gain of 50.66% has been boosted by a recently torrid pace, as the fund tacked on more than 9% this month as gold rallied alongside stocks.
This fund's success can be attributed to active management that focuses on gold mining and production or companies with royalty models.
Royalty companies have lower expenses, less volatility and more predictable revenue streams. Past performance isn't a guarantee of future returns, but over its two-and-a-half years on the market, GOAU has outperformed the two largest gold miner ETFs.
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