These top ETFs have generated greater than 45% returns in 2021.
It was a great year for investors who tracked the S&P 500 index of top U.S. companies, as it has returned about 25% since Jan. 1. However, a handful of exchange-traded funds have offered nearly double that return. Admittedly, there were some smaller funds out there that did remarkably well, such as the Breakwave Dry Bulk Shipping ETF (ticker: BDRY) which has only $69 million under management but surged more than 180% this year. There also were “leveraged” funds, which unsurprisingly supercharged the profit potential of an underlying strategy such as the Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL) that uses risky instruments to offer three times the performance of related stocks. Investors didn’t have to take on risky or unproven funds to grab more than 45% returns — and these seven best performing ETFs prove it by offering great gains and managing more than $1 billion in total assets each.
United States Oil Fund LP (USO)
The first entry on the list is also the first of many commodity-related investments that did quite well this year. Specifically, the United States Oil Fund is an ETF that attempts to track the price of West Texas Intermediate crude oil through futures investments. This means USO doesn’t perfectly track crude oil prices, but it marches steadily in the same direction. And this year, that direction has been significantly higher thanks to inflationary pressure on oil prices as well as recovering demand.
Assets under management, or AUM: $2.6 billion
Year-to-date, or YTD, performance: +58%
Global X Uranium ETF (URA)
An energy commodity of a different type, uranium has been in focus because of the potential of its use as a “bridge” fuel in the age of climate change. Sure, nuclear energy has its own drawbacks, but it doesn’t generate the carbon emissions you see from fossil fuels. URA holds uranium mining companies and nuclear energy utilities and service providers, with its top holdings being the $11 billion miner Cameco Corp. (CCJ) and the Kazakhstan based National Atomic Energy Company.
AUM: $1.2 billion
YTD performance: +53%
Fidelity MSCI Energy Index ETF (FENY)
A more diversified look at the energy space is FENY — but as you’re undoubtedly starting to notice, the specific formulation of an energy ETF can have an influence on its overall performance. This Fidelity fund is benchmarked to an MSCI Inc. (MSCI) index of about 100 total stocks. Oil majors such as Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) lead the list, at just over a third of total assets. However, the strong performance of these two players has also led to strong performance for this Fidelity fund in 2021.
AUM: $1 billion
YTD performance: +47%
Vanguard Energy ETF (VDE)
A look-alike fund in many ways, VDE offers a slightly higher expense ratio but a slightly larger asset footprint. These differences aside, they are almost exactly same and comprise megacap energy stocks in a similar list of about 100 holdings. The bottom line for investors is that both funds are legitimate vehicles, so if you can trade one or the other without commissions, you may want to pick the winner that way. But the common theme is that large-cap energy did quite well in the last year.
AUM: $5.9 billion
YTD performance: +48%
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
Another flavor of fund that has done well in the energy space is this exploration and production ETF from SPDR. As indicated by the performance of crude oil prices, explorers have seen a significant upswing in profits as they extract their reserves and bring them to market at a time when demand is strong and prices are up significantly. Since top holdings of the prior mainstream energy funds are heavily weighted in large oil companies, XOP has an edge because of a more “equal weight” approach where no single holding represents more than about 3%. That means smaller and more dynamic companies play a bigger role, which has driven outperformance.
AUM: $3.3 billion
YTD performance: +61%
VanEck Rare Earth/Strategic Metals ETF (REMX)
Finally, here’s a fund that is not directly related to energy. However, REMX is indeed a tangential play on the major energy shifts in the last few years via its exposure to companies that produce the minerals used in efficient battery technology. We’re talking mainly lithium and cobalt, with top holdings including Chinese firms that focus on these rare metals. Investors typically can’t easily buy into stocks like this, offering a unique way to play the rise of electric vehicles and other battery tech in the age of sustainability.
AUM: $1.1 billion
YTD performance: +65%
KraneShares Global Carbon Strategy ETF (KRBN)
Speaking of sustainability, the top performing fund of 2021 among these liquid and established ETFs is a carbon-focused ETF from KraneShares. This top ETF offers exposure to cap-and-trade emission allowances in both the U.S. and the EU carbon credit marketplaces. As economic activity has picked up in the last year, so have carbon emissions. And at the same time, climate change concerns have tightened up these markets and driven up prices for carbon. The result is that investors who play emissions trading for profit have cashed in big time over the last year.
AUM: $1.5 billion
YTD performance: +97%
7 best performing ETFs of 2021:
United States Oil Fund LP (USO)
Global X Uranium ETF (URA)
Fidelity MSCI Energy Index ETF (FENY)
Vanguard Energy ETF (VDE)
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
VanEck Rare Earth/Strategic Metals ETF (REMX)
KraneShares Global Carbon Strategy ETF (KRBN)
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7 Best Performing ETFs of 2021 originally appeared on usnews.com
