This year in ETFs highlighted the dramatic difference in performance of varying areas of the market, with one sector dominating the top performers list. Given the towering outperformance of oil and gas assets and major declines elsewhere, many top performers were leveraged versions of commodities strategies and inverse funds. In many cases, the energy funds didn’t even need leverage to outperform, with plain vanilla sector funds seeing massive gains. However, when you strip out the leveraged funds, there are some surprising names at the top to break the stranglehold of oil & gas ETFs. *List excludes inverse funds and levered versions of other strategies. Return data through 12/23. The iShares MSCI Turkey ETF has surged in the second half of the year and has a total return of more than 100%. That actually puts it ahead of the non-leveraged energy funds, according to FactSet. Sky-high inflation and political influence at the nation’s central bank make investing in Turkey a tricky proposition for investors, but it has worked out in 2022. Even with the Turkey outlier, the list overall is still dominated by oil and gas funds, with the VanEck Oil Services ETF (OIH) generating a total return of 65%. The are six other energy-related funds that had a total return of more than 60% through Dec. 23. Excluding all of the energy-specific funds, the remaining list shows more innovative strategies that had success. *List excludes inverse funds and levered versions of strategies. Return data through 12/23. The second best-performing fund on the list is the Simplify Interest Rate Hedged ETF (PFIX) . The fund is one of several that have flourished in a year marked by the highest inflation in decades and repeated rate hikes from the Federal Reserve. The Advocate Rising Rate Hedge ETF (RRH) and FolioBeyond Rising Rates ETF (RISR) also did their job in buoying investors portfolios. The KFA Mount Lucas Managed Futures Index Strategy ETF (KMLM) , which gained more than 30%, was also indicative of a trend in 2022. Several managed futures funds had big years as active management of directional bets on areas of the market like tech and energy proved to be a target-rich environment. On the inflows side, broad market funds from Vanguard and iShares were the big winners, as those two brands continued to dominate the ETF market. But some smaller funds that saw major inflows this year were SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) , JPMorgan Equity Premium Income ETF (JEPI) and WisdomTree Floating Rate Treasury Fund (USFR) , especially relative to their size.
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