June ETF Investor Performance Review

By Dave Nadig

There has been a lot of chatter lately—since John Bogle dropped his "investors are getting fleeced in ETFs" bomb two weeks ago—that the average Joe just isn't going to do very well in ETFs because he'll be getting in when he should get out, and vice versa.

Well, let's see how the "average" ETF investor did in the month of June. We don't have numbers on how asset flows changed during the last 30 days yet, although our friends at the National Stock Exchange are sure to get us that soon. But what we do know is the bets investors, as a mass of men and women leading lives of quiet desperation, made at the beginning of the month.

As a refresher, here were the assets of leading ETFs at the end of May (in billions of dollars):

		AUM
SPDR Index 500	SPY	$63,138
SPDR Equity Gold	GLD	$35,076
iShares MSCI-Emerging Mkts	EEM	$30,793
iShares MSCI-EAFE	EFA	$30,201
iShares S&P 500	IVV	$17,766

There are a few interesting things on this list. The first is simply the size of the investments outside core U.S. equity holdings. A total of $35 billion is a lot of gold, and the combined $61 billion in EEM/EFA is also a staggering number. So how'd investors fare against the stodgy old S&P 500 in June?

Before we get into that, it's worth pointing out an interesting divergence just inside the S&P 500. For the month of June, SPY was down 63 basis points. Its largest competitor, the iShares IVV, was down only 50 basis points. The reason, one suspects, is that the dividend date for SPY was June 19, and as a matter of policy, SPY holds its dividends in cash and won't pay those dividends out until the end of July. IVV, on the other hand, marked dividends on June 23 and paid them on the June 29, and reinvested them as a matter of policy during the interim period.

click to enlarge

In the long term, does this create a tremendous difference in investor experience? Probably not. But during the short term, it reinforces once again why it pays to know what you're buying. I imagine an unknowing investor who simply didn't bother to check might have looked at their one-day performance in SPY on June 19 and had quite the head-scratch.

And of course, these distinctions pale in comparison to the performance differences experienced by investors in the non-U.S. equity markets.

Investors in U.S. dollar-denominated ETFs based on the MSCI benchmarks got killed in June, a story helped by a greenback that was surprisingly strong (up over half a percent) in June. Investors in EEM, a fund that pulled in over $1 billion in new assets in the prior month, faced a gut-check of an 8% loss before the bounce back last week.

But if we're looking for the real goat in the ETF Top 5, it was the GLD investor. Down over 5%, gold just hasn't been able to find the footing to launch the $1,000+ run so many inflation hawks are calling for. Not to say it will never happen, but over half a billion in new May money got it wrong headed into June.

But let's not pick on gold. Let's look at the hottest of the hot ETFs.

In May, that award didn't go to some 3x leveraged trading vehicle, but to the iShares MSCI Brazil Index Fund (NYSE: EWZ), exploding at the seams with over $1.5 billion in new assets in the month leading up to June 1. How'd all that hot money do?

A bit worse than all the other emerging markets money in the Top 5.

The point of this isn't to poke fun. Year-to-date, EWZ is kicking the pants off the S&P 500 (up over 53%). In fact, every single one of these funds is beating the loyal spider. But it does make the point that timing is everything in investing. Being in EWZ today doesn't necessarily make you the smartest guy in the room, any more than my boring old S&P 500 position, today, makes me a goat.

If you bought into EWZ back in January and you've been along for the ride, now that was quite the call. And for this one-month period, the big money in the S&P was the "winner," if you can call it that. Next month?

If I knew that …