Performance Update Of Real Money ETF Assets

Oct 07, 2013 in ETF Multi-Asset 100

How are investors as a whole doing in 2013?   If you think the U.S. investment world owns a lot of large-cap U.S. stocks, you would be right.   However,  if you think that is ALL there is to it -- you would be wrong.    There are large amounts of capital invested internationally (Europe, Asia, Pacific) and in non-equity markets (bonds, preferreds, MLPs, REITs etc...).   This reality is why we run the numbers for the ETFreplay 100 -- because it is a much better proxy for how real-world investors are doing than tracking a single asset like the S&P 500, which is just not the best proxy for how investors are allocated.

To give a little perspective,  Exchange Traded Products  (only those that trade on the US exchanges) reached $1.57 trillion in assets in September of 2013:

ETF investors in the top 100 (in assets) taken as a whole started the year with $1.07 trillion and on that base have made approximately +$75 billion (+7.0%) in 2013.   That is, if you held all the asset classes in the same proportions as the amounts actually invested with REAL dollars by investors in ETFs, your YTD total return is +7.0%.   Note that this figure INCLUDES the fees (expense ratios) of the products -- which are automatically removed from the funds and are reflected in total return.

September saw a strong outperformance by international stocks.   The largest International ETF (EFA) rallied +7.8% in September,  which was +460 basis pts (+4.6%) better than the S&P 500.   Brazil (EWZ), an emerging market, rallied +13.0% in September.   Precious metals and precious metals stocks have been a terrible investment in 2013.    Investors have lost over -$25 billion in the largest 5 ETFs in this segment (GLD, SLV, IAU, GDX & GDXJ).   

Many people might see the performance of the ETFreplay 100 at +7.0% YTD and think that is a bad number.  However, it should not be viewed as good or bad --- it should be viewed as simply the reality of achieved investor market returns.   Moreover, the ETFreplay 100 returned +5.4% for the third quarter of 2013 -- and that is +430 basis pts (+4.3%) better than the primary hedge fund index (HFRX Global), which returned just +1.1% in Q3.

Keep in mind, if you are comparing a portfolio of ONLY U.S. stocks to the S&P 500 (as mutual funds report), that is a useful comparison.   But if you are comparing a portfolio of many assets to the S&P 500, that is an apples to oranges comparison.    Even most of the purest index fund advisers that parade the media are they themselves materially underperforming the S&P 500 -- precisely because they are not fully invested in specifically the S&P 500 index.   The term 'index investor' should never be considered the equivalent of '100% invested in the S&P 500'.   

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