In this post, we have taken the largest 150 exchange trade products (assets) and grouped the returns into an overall distribution to summarize what was a range of generally available returns in 2011 (all are total return). We wanted to see how we could summarize the year using a reasonably wide cross-section of widely-owned ETFs. There are many different kinds of ETFs in the list – from bonds to stocks to MLPs, REITs, Preferreds, small cap, mid cap, country funds, regional funds, developed markets, emerging markets, cash, muni bonds, high-yield, mortgage bonds, etc etc... We thought this was an interesting way to do it since these are all liquid securities available to anyone. While there are a number of useful ETFs that fall below the top 150 – this is a manageable high-level look:
The median for the top 150 in 2011 was…. 0.0%. Yes, Zero Point Zero. So the distribution is easy enough to summarize, it is centered around zero where one-half were up and one-half were down.
On the one hand, if you weren’t focused on a small set of niche ETFs -- longer-duration treasuries and/or U.S. utility stocks, there wasn’t a lot of opportunity to do better than the +10 to +15% range. On the other hand, many of the more mainstream investor themes dropped more than -15% (emerging markets, gold miners, US financials, developed market international equities).
For a point of comparison, let's look at the 2010 distribution using the same scale:
Note that for 2010, the median of this same group of 150 ETFs had a total return of +15.1% (the median ETF in 2010 was actually the S&P 500). So the entire distribution shifts up very significantly --- note that many ETFs rose in excess of +20% in 2010 and only UNG lost more than -5% (UNG was also the worst of the lot in 2011). So this was a very positive year and there were plenty of places to achieve a fairly robust return without any real areas to lose money, everything essentailly went up with many rising a lot.
2011 was a year mostly to just stay out of trouble. It wasn't an outright bad year, there just weren't that many places to really drive an entire portfolio strongly up. While we all want to generate high absolute returns --- the fact is that we live in a world where you need to put it all in the context of what was actually available.