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Rational investors need to weigh risk and return. In previous analyses of individual stocks, we found that the utility sector was the most resilient in the recent market downturn, and that water utilities were the safest utility industry.

But which funds dropped the most? Which dropped the least? Where was there the most risk among exchange traded funds (ETFs), exchange traded notes (ETNs), and closed-end funds (CEFs)?

To answer this question, 1528 different ETFs, ETNs, and closed-end funds were screened and sorted based on their performances over week-long downturn that lasted through August 9th, 2011. Over the course of this week, the S&P500 index dropped over 13.3% while the mean drop for a broader sample of 4541 equities was 10.1%,* providing an opportunity to observe fund differences during extreme market drops.

Below are the twenty funds with the worst returns during the down week:

Ticker

Fund

Weekly Gain (Loss)

RUSL

Direxion Daily Russia Bull 3x S

-45.99%

ERX

Direxion Daily Energy Bull 3X Shares

-39.25%

TNA

Direxion Daily Small Cap Bull 3X Shares

-36.41%

YINN

Direxion Daily China Bull 3x Sh

-35.26%

MWJ

Direxion Daily Mid Cap Bull 3X Shares

-33.77%

RTLA

iPath Long Extended Russell 2000 TR ETN

-31.98%

LBJ

Direxion Daily Latin America Bull 3X Shs

-31.29%

XIV

VelocityShares Daily Inverse VIX ST ETN

-31.19%

SOXL

Direxion Daily Semicondct Bull 3X Shares

-30.26%

FSE

FactorShares 2X: S&P500 Bull/TBond Bear

-29.95%

URTY

ProShares UltraPro Russell2000

-29.67%

EDC

Direxion Daily Emrg Mkts Bull 3X Shares

-29.52%

UMDD

ProShares UltraPro MidCap400

-29.22%

GASL

Direxion Daily Natural Gas Rela

-29.04%

MATL

Direxion Daily Basic Materials

-28.25%

FAS

Direxion Daily Financial Bull 3X Shares

-27.62%

DIG

ProShares Ultra Oil & Gas

-27.36%

ROLA

iPath Long Extended Russell 1000 TR ETN

-26.77%

DRN

Direxion Daily Real Estate Bull 3X Shrs

-26.70%

UVT

ProShares Ultra Russell2000 Value

-26.07%

Almost like a mirror image of the underperformers, the best performing funds are listed below:

Ticker

Fund

Weekly Gain (Loss)

CVOL

C-Tracks Citi Volatility Index TR ETN

68.22%

RUSS

Direxion Daily Russia Bear 3x S

57.83%

TVIX

VelocityShares Daily 2x VIX ST ETN

56.59%

ROSA

iPath Short Extended Russell 1000 TR ETN

47.12%

SRTY

ProShares UltraPro Short Russell2000

42.07%

RTSA

iPath Short Extended Russell 2000 TR ETN

37.97%

YANG

Direxion Daily China Bear 3x Sh

36.72%

EDZ

Direxion Daily Emrg Mkts Bear 3X Shares

36.67%

TZA

Direxion Daily Small Cap Bear 3X Shares

34.22%

ERY

Direxion Daily Energy Bear 3X Shares

33.47%

GASX

Direxion Daily Natural Gas Rela

32.47%

VIXY]

ProShares VIX Short-Term Futures ETF

30.71%

VIIX

VelocityShares Long VIX Short Term ETN

30.64%

VXX

iPath S&P 500 VIX Short-Term Futures ETN

30.41%

SFSA

iPath Short Extended S&P 500 TR ETN

29.87%

SCO

ProShares UltraShort DJ-UBS Crude Oil

28.76%

LHB

Direxion Daily Latin America Bear 3X Shs

26.97%

SQQQ

ProShares UltraPro Short QQQ

25.45%

BZQ

ProShares UltraShort MSCI Brazil

25.30%

SJF

ProShares UltraShort Russell1000 Value

24.57%

These lists show that levered funds were the most extreme performers. In addition, many of the levered funds and their inverses would have yielded a positive return if held in combination. For example, holding RUSS (57.83%) and RUSL (-45.99%) would have yielded a positive overall return. This result shows that these funds behave like options, and that holding both the levered and inverse levered fund is the equivalent of a straddle on the underlying asset.

*Stocks with volumes under 5000 were excluded from the screen, since low liquidity makes them hard to trade. ETFs and other funds were also excluded.

Source: 20 Best and Worst ETFs, ETNs, and Closed-End Funds in the Market Drop