The broader markets have strengthened this year, but on the other end of the investment spectrum, some leveraged and niche category exchange traded funds have managed to shrink over 50% this year.
Given the nature of geared products to produce leveraged returns, leveraged inverse ETFs would naturally experience deeper declines when on the wrong side of a bet. As John Waggoner for USA Today notes, investors would have to see a gain of over 100% just to break even in some of these funds.
For instance, bearish leveraged gold miner stock ETFs are among the worst offenders this year, with the Direxion Daily Junior Gold Miners Index Bear 3X Shares (JDST) down 84.5% and the Direxion Daily Gold Miners Bear 3X Shares (DUST) down 67.8% year-to-date. The two ETFs try to reflect the daily -300% performance of the junior and gold miner space, respectively. [Miners ETFs Knock on the Door of Another Big Move]
Gold stocks, though, have been outperforming as they generate greater revenue and profit from higher gold prices. Additionally, many have also been able to bolster earnings by expanding output and trimming costs. [Gold Miners, ETFs Gain Hedge Fund Fans]
The CBOE Volatility Index, or VIX, has fallen to record lows this year, reflecting subdued volatility in the equities market while equities continued to march higher this year. Consequently, volatility-related investments have floundered, with the C-Tracks on Citit Volatility Index ETN (CVOL) down 54.7% and the VelocityShares Daily 2X VIX Short-Term ETN (TVIX) down 54.4% year-to-date. [VIX ETFs Reveal a Complacent Market]
Additionally, the uncharacteristically frigid winter months caused a surge in natural gas demand to keep the cold at bay, which helped push down inventory levels to record lows. Consequently, the leveraged bearish play, VelocityShares Daily 3x Inverse Natural Gas ETN (DGAZ) , has declined 53.7% so far this year. [Low Production Outlook is Supporting Natural Gas ETFs]
For more information on ETFs, visit our ETF performance reports category.