5 ETFs Losing Half or More of Its Value in 2015

Overall, 2015 has not been good for the U.S. equity market, caught up as it was in a vicious circle of never-ending woes. It all started with Fed uncertainty, a strong dollar and slumping commodities, and then extended to geopolitical tensions and global growth concerns, especially in China.

Additionally, the U.S. economy, which was growing at a faster rate in over a decade in 2014, has cooled off substantially this year. While healing labor market, a gradual recovery in the housing market, robust auto industry, and cheap fuel are driving growth, persistent weakness in manufacturing activity, plunging oil prices, and shaky consumer confidence are posing threats to economic expansion (read: 5 ETFs for Loads of Holiday Shopping Delight).

As a result, the major indices – the S&P 500 and Dow Jones – are in the red territory from a year-to-date look, losing 0.3% and 1.4%, respectively.

In fact, a number of products have been crushed, piling up huge losses for many ETFs. Below, we have highlighted five ETFs that have been hit badly so far in 2015 and might continue their rough trading in the months ahead if the trends persist unabated.

First Trust ISE-Revere Natural Gas Index Fund (FCG) – Down 56.5%

Natural gas producers have been the biggest laggard this year on falling natural gas price. This trend is likely to continue in the months ahead given declining demand, increasing production, and growing global glut. Additionally, the expectation of a milder weather for late December – the key period that drives heating demand – will push the natural gas price lower. The Energy Information Administration (EIA) expects heating bill to decline 13% this winter (read: No Winter Cheer for Natural Gas ETFs?).

Consequently, FCG, which offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas, is down 56.5% in the year-to-date time frame. It follows the ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across components with none holding more than a 7.1% share. The fund has amassed $172 million in its asset base while charging 60 bps in annual fees. Volume is good with more than 1.7 million shares exchanged per day on average. The ETF has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook.

First Trust ISE Global Platinum Index Fund (PLTM) – Down 54.3%

The precious metal space has been hit by the double whammy of the broad market commodity rout and rate hike concerns. Robust supply and dwindling demand are weighing on the price of platinum since the start of the year. Additionally, the prospect of a rate hike backed by solid job numbers and moderate inflation has dampened the appeal for platinum. As such, PPLT has fallen 54.3% so far this year.

The fund provides exposure to the companies that are active in platinum group metals mining by tracking the ISE Global Platinum. In total, it holds 18 securities in its basket with double-digit concentration in the top three firms. Other firms do not hold more than an 8.07% share. South African firms take the largest share in the basket at 27.6% followed by double-digit exposure each in Australia, United Kingdom, United States, Russia and Canada  (read: Top ETF Stories of November).
 
Market Vectors Coal ETF (KOL) – Down 54.0% 

Coal has fallen completely out of favor over the past few years due to the thriving alternative energy space and weak global industry fundamentals. The depletion of fossil fuel reserves, global warming and high fuel emission issues, new and advanced technologies as well as more efficient applications are making clean power more feasible, reducing the demand for the black diamond. These are making it difficult for the coal miners to sustain their profitability and margins.

As a result, the ETF targeting the global coal industry has seen a wild ride and was off nearly 54% so far this year. KOL tracks the Market Vectors Global Coal Index. Holding 27 securities in the basket, the fund is concentrated in the top 10 holdings at 64.6% of total assets. It has a Chinese focus accounting for 28.4% of the portfolio while U.S., Australia and Canada round off the next three. The fund has amassed $42.5 million in its asset base and trades in average daily volume of 71,000 shares. Expense ratio came in at 0.59%. KOL has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook.

Yorkville High Income MLP ETF (YMLP) – Down 52.7%

MLP was the worst hit corner from the oil price carnage with YMLP shedding the most – 52.7% in the year-to-date time frame. Being an interest rate sensitive sector, these securities will be further impacted by rising rates. This bearish trend is likely to continue as the Fed is on track to increase rates as early as next week (read: Time for These Surging High-Yield MLP ETFs?).

The fund follows the Solactive High Income MLP Index, charging investors 82 bps in annual fees. Holding 26 stocks in its basket, it is highly concentrated in the top 10 holdings at 58.3%, suggesting higher concentration risk. Oil & gas pipeline products take the top spot from a sector look at 40%, followed by oil refining & marketing (12%), and oil & gas drilling (10%). The product has managed $101.3 million in AUM and trades in moderate volume of 137,000 shares.  

SPDR S&P Metals & Mining ETF (XME) – Down 50.0%

Thanks to plunging metal prices and weak global trends, this broad metal & mining ETF has also lost half of its value. Acting as leveraged plays on underlying metal prices, metal miners tend to experience huge losses than their bullion cousins in the slumping metal market. In particular, a strong U.S. currency is making dollar-denominated assets more expensive for foreign investors, thereby dulling the appeal for these commodities (read: 6 Commodity ETFs Hit 52-Week Low Recently; Still at).

The ETF offers a broad exposure to the U.S. metal and mining industry by tracking the S&P Metals & Mining Select Industry Index. Holding 30 stocks in its basket, it uses an equal weight methodology and does not put more than 6.8% of assets in a single security. In terms of industrial exposure, steel makes up a large chunk at 49.3%, while diversified metals and mining, and gold round out the next two spots with double-digit allocation each. The product has $242.4 million in AUM and trades in solid trading volumes of more than 2.6 million shares per day on average. It charges 35 bps in fees and expenses.

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FT-ISE R NAT GA (FCG): ETF Research Reports
 
FT-ISE GLBL PLT (PLTM): ETF Research Reports
 
MKT VEC-COAL (KOL): ETF Research Reports
 
YORKVL-HI MLP (YMLP): ETF Research Reports
 
SPDR-SP MET&MIN (XME): ETF Research Reports
 
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