2020 is an unforgettable year – we have experienced the worst and best times – we went through one of the worst pandemics in human history and yet the stock market achieved a remarkable return despite a contraction in the economy. Everything happened so fast and some of us are still trying to make sense of what’s going on.
While you are catching your breath, I will share some of the fascinating returns achieved by these 16 ETFs – over 100% in a year for an ETF is unheard of and this happening in a pandemic year with millions of deaths makes it more unbelievable. There were more ETFs that have achieved more than 100% return this year but I have excluded them as they are leverage ETFs.
These ETFs are not unique as they were riding on specific themes that did well. Here are the 5 themes:
- Disruptive Technologies
- Clean Energy
- IPOs
- Ecommerce
- Big Tech
Disruptive Technology ETFs
ARK Invest popularised investing in disruptive technologies. I wrote about it previously about the stocks that they invest in. Instead of buying the obvious winning FANMAG stocks, the fund manager has decided to go after younger companies that have the potential to spearhead innovations and become the future big tech behemoths.
So far, almost anything that ARK Invest has touched has turned into gold. The superior performance this year has attracted loads of investment dollars and the largest was the ARK Innovation ETF with $16 billion asset under management.
- ARK Genomic Revolution ETF (ARKG) +186%
- ARK Next Generation Internet ETF +150%
- ARK Innovation ETF +147%
- ARK Fintech Innovation ETF +101%
It is important to note that these ETFs are not your regular ones whereby they track an index and buy the underlying securities in exact proportions. These ETFs are actively managed which means the fund manager has the discretion to decide on the securities to buy and sell.
Clean Energy ETFs
Solar stocks had a fantastic run this year – Enphase (NASDAQ:ENPH) (solar stock) was up 447% this year. Invesco Solar ETF was the best performer among the clean energy ETFs. Besides solar, clean energy ETFs were also helped by electric vehicles – Tesla (NASDAQ:TSLA) was up 636% year-to-date (15 Dec 2020).
They might continue to do well considering that Biden is known to be a climate change advocate.
Not just US, President Xi Jinping has pledged to cut carbon emissions by over 65% and increase the share of non-fossil fuels in energy consumption to 25%. These targets were to be achieved by 2030.
It is also interesting to know that clean energy ETFs contributed half of the 16 ETFs in this list.
- Invesco Solar ETF +172%
- Invesco WilderHill Clean Energy ETF +162%
- First Trust NASDAQ Clean Edge Green Energy Index Fund +149%
- Invesco Global Clean Energy ETF +110%
- ALPS Clean Energy ETF +109%
- KraneShares MSCI China Environment Index ETF +104%
- SPDR S&P Kensho Clean Power ETF +103%
- iShares Global Clean Energy ETF +102%
IPOs
There’s only one ETF on this list – Renaissance IPO ETF has gone up by 112% this year.
As the name suggests, the ETF buys into IPOs in the U.S. stock markets with their proprietary selection criteria. The portfolio has a heavy exposure (more than 50%) to technology stocks.
Here are the top 10 stocks in the portfolio:
- Moderna
- Uber
- Zoom
- Crowdstrike
- Slack
- Datadog
- StoneCo
- Avantor
- Peloton
You would know that many of these stocks have outperformed others, if you have been following the US stock markets.
Ecommerce
Ecommerce has proved its worth during the lockdown period as people could continue to buy stuff and get their supplies delivered. Many more have probably got onboard with online shopping during the heights of the pandemic. Some might even have gotten hooked and a new habit has been formed.
There are two ecommerce ETFs:
- Amplify Online Retail ETF +111%
- ProShares Online Retail ETF +104%
Amplify Online Retail ETF focused on companies that generate at least 70% of their revenues from online sales and had an equal exposure to the retailers in the portfolio.
ProShares Online Retail ETF, on the other hand, had larger weightage on bigger ecommerce names such as Amazon and Alibaba.
Big Tech
Goldman Sachs found that the entire S&P 500 index was lifted by just 5 companies. S&P 500 was up by about 6% in Oct 2020. 495 companies were still in the red with a collective loss of 1%. In contrast, Facebook, Amazon, Apple, Microsoft and Google were up by 39% over the same period.
Hence, the stock market recovery has been led by tech stocks. It is then no surprise that O’Shares Global Internet Giants ETF has done well this year.
Besides investing in the FANMAG stocks, the ETF has holdings in China tech too – the likes of Alibaba, Tencent, Pinduoduo and Meituan. It also holds relatively smaller tech companies such as Shopify, Twilio, Zscaler etc.
Will these ETFs perform well in 2021?
Historical returns do not predict future results.
We can’t be sure that these ETFs would perform equally well in 2021. It is very risky to simply bet on their future directions with guesswork. One way to gauge, is to use a momentum or a trend following strategy to join the bandwagon and exit when their trends end. This would need proper risk management.
Another approach is to look beyond just one year of performance and see which are the themes you believe would work out over several years. This is because such themes would take a long time to pan out and one cannot expect the world can change in a heartbeat. For example, China has set 2030 targets for more clean energy adoption. So patience is definitely needed and you get handsomely rewarded if you get the themes right.
Nonetheless, it is good to appraise a crazy year of stock performance and I have summarized all their returns and included some fund information in the table below:
| ETF | Ticker | 2020 YTD return (15 Dec 2020) | Expense Ratio | Fund Size |
| ARK Genomic Revolution ETF | ARKG | +186% | 0.75% | $5,770m |
| Invesco Solar ETF | TAN | +172% | 0.71% | $136m |
| Invesco WilderHill Clean Energy ETF | PBW | +162% | 0.70% | $1,700m |
| ARK Next Generation Internet ETF | ARKW | +150% | 0.79% | $4,830m |
| First Trust NASDAQ Clean Edge Green Energy Index Fund | QCLN | +149% | 0.60% | $1,560m |
| ARK Innovation ETF | ARKK | +147% | 0.75% | $16,030m |
| Renaissance IPO ETF | IPO | +112% | 0.60% | $679m |
| Amplify Online Retail ETF | IBUY | +111% | 0.65% | $1,250m |
| Invesco Global Clean Energy ETF | PBD | +110% | 0.75% | $228m |
| ALPS Clean Energy ETF | ACES | +109% | 0.55% | $634m |
| ProShares Online Retail ETF | ONLN | +104% | 0.58% | $843m |
| KraneShares MSCI China Environment Index ETF | KGRN | +104% | 0.80% | $55m |
| SPDR S&P Kensho Clean Power ETF | CNRG | +103% | 0.45% | $163m |
| O’Shares Global Internet Giants ETF | OGIG | +102% | 0.48% | $633m |
| iShares Global Clean Energy ETF | ICLN | +102% | 0.46% | $3,270m |
| ARK Fintech Innovation ETF | ARKF | +101% | 0.75% | $1,470m |
