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The Worst ETF Bets Of 2013

Cinthia Murphy

It may come as no surprise to those who have watched gold's epic fall from grace this year that gold miner ETFs—those that own stocks of companies mining and producing the yellow metal—are some of the worst-performing funds so far this year.

A tally of the 10 biggest ETF losers year-to-date currently includes five precious-metal miner funds, including the big names in the space such as the Market Vectors Gold Miners ETF (GDX), with $5.95 billion in assets, and its smaller-cap counterpart, the $1.7 billion Market Vectors Junior Gold Miners ETF (GDXJ).

GDX has bled nearly 37 percent of its value in the first four months of the year, while investors yanked a net of $372 million from the fund amid a decline in gold prices that stripped 12 percent off the value of gold in four months. GDXJ, meanwhile, is now 38.8 percent in the red.

These are equities funds, and their decline came despite a 13 percent rally in the S'P 500 that shot the broad benchmark to record highs this year.

"Miners were suffering even before the big drop in gold due to cost and regulation pressures, but their decline accelerated once the metal broke down," HardAssetsInvestor.com analyst Sumit Roy told IndexUniverse. "Until gold prices stabilize, the outlook is grim for the sector."

One of the core problems with the segment has been cost—both in capital and operating—which have risen more than most projected, VanEck's Joe Foster said in a recent interview .

"It caught the entire industry off guard," Foster said then. "Because of those rising costs, companies have missed expectations. They are not as profitable as the markets thought they would be, and their share prices have suffered because of that."

"Companies have come to realize they can't deliver the growth they have promised in the past," he added. "Instead, they need to focus on cost control, returns to shareholders and bottom-line profits, rather than growth. Those are the changes I think we'll see that will bode well for the industry."

The worst-performing gold miner fund year-to-date, however, is the $30 million Global X Gold Explorers ETF (GLDX), which has tallied losses of nearly 46 percent since Jan. 1.

Volatility ETFs:The Gift That Keeps On Giving

It's worth noting that gold miner ETFs weren't alone in populating this year's bottom-performers list. Funds linked to the CBOE Volatility Index, or VIX, remained an investor's best bet at losing money.

As IndexUniverse's Olly Ludwig pointed out in a blog late last year , VIX-related exchange-traded products aren't really "investments" in a classic buy-and-hold sense, but are often used as short-term portfolio insurance.

This insurance works well when markets are tumbling, but as U.S. equities continue to rise on a growing sentiment that the economy is slowly finding its way out of its post-crash doldrums—and, yes, volatility—VIX-linked strategies are feeling the heat of record-breaking action in the U.S. stock market.

Indeed, in 2012, VIX-linked funds were the worst-performing strategies, bleeding as much as three-quarters of their value in the 12-month period ended Dec. 31. They've pretty much remained in that downward trend so far in 2013.

The iPath S'P 500 VIX Short-Term Futures ETN (VXX)—the biggest VIX-linked strategy, with more than $1.17 billion in assets—has slid 39.5 percent so far this year, after topping 2012's worst performers list with losses of 76.7 percent.

Its ProShares counterpart, the ProShares VIX Short-Term ETF (VIXY) has also dropped 39 percent in the first four months of the year, after sliding 76 percent in 2012.

Biggest Losers ($, Millions)
Ticker Name Issuer Non-Geared YTD 4/30/13 Flows Non-Geared YTD 4/30/13 AUM ($, M) Non-Geared YTD 4/30/13 TRR Expense Ratio
CVOL C-Tracks Citi Volatility ETN CitiGroup - 1.83 -58.40 1.15
GRN iPath Global Carbon ETN Barclays Capital 0.07 0.49 -52.81 0.75
GLDX Global X Gold Explorers Global X 11.06 30.15 -45.96 0.65
VIIX VelocityShares VIX Short Term ETN VelocityShares 7.98 16.09 -39.63 0.89
VXX iPath S'P 500 VIX Short-Term Futures ETN Barclays Capital 667.05 1,174.55 -39.51 0.89
VIXY ProShares VIX Short-Term ProShares 120.36 192.29 -39.04 0.85
GDXJ Market Vectors Junior Gold Miners Van Eck 120.84 1,701.46 -38.81 0.54
GDX Market Vectors Gold Miners Van Eck -372.02 5,957.14 -36.80 0.52
RING iShares MSCI Global Gold Miners BlackRock 11.06 29.03 -36.45 0.39
SIL Global X Silver Miners Global X -5.81 226.64 -35.50 0.65

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