The coronavirus is spreading around the globe, and many investors have reacted by dumping stocks and diving into safe havens such as bonds and gold. Some observers say algorithm-based trading among hedge funds has helped fuel the rout, and it remains to be seen whether longer-term investors will hold the line if coronavirus disease 2019, or COVID-19, turns into a raging global pandemic.

Meanwhile, not all equity assets have been hit during the recent sell-off. A look at the best performing exchange-traded funds during the past month as COVID-19—and the concerns about it—have slowly gained momentum reveals a surprise or two regarding which sectors have done well during this period.

One aspect that’s not surprising is that the best performing exchange-traded products all are either levered and/or inverse vehicles making bearish bets against the broader market or specific sectors, or are linked in one way or another to the VIX, formally known as the Cboe Volatility Index.

For example, the top two performing ETPs during the past month have been the Direxion Daily Natural Gas Related Bear 3x Shares (GASX), which seeks a return that’s minus-300% of its benchmark index for a single day; and the VelocityShares Daily 2x Short Term ETN (TVIX), which tracks either the S&P 500 VIX Short-Term Futures Index or S&P 500 VIX Mid-Term Futures Index and employs 200% leverage on the volatility moves. GASX has zoomed 72.5% and TVIX has jumped 70.8% during the past 30 days.

In fact, according to ETP research site, the top-50 performing ETPs during the past month fit into the above two categories. But this article deals with the long-only ETF space where most retail investors play, with a focus on equity funds.

In that vein, the best performer during the past month has been the Invesco Solar ETF (TAN), with a return of 13.3%. In comparison, the SPDR S&P 500 ETF (SPY) was down nearly 5% during this period.

TAN has assets of nearly $639 million, and its short-term performance is no fluke. It gained 66.5% last year versus 31% for SPY, a commonly used market benchmark. And its three-year average annual return of 27% easily beats SPY’s average return of 11.8% during that period. (On a five-year basis, though, SPY has bragging rights with annualized returns of 10.3% versus 0.9% for TAN.)

The solar power industry that underpins TAN has become much more competitive against traditional energy sources thanks to greater efficiencies and falling prices, making it a viable alternative even without government subsidies.

Elsewhere, the Aberdeen Standard Physical Palladium Shares ETF (PALL) has gained 12.7% during the past month. This $454 million fund has been on a roll with a one-year return of 74.4%. In some ways, this is also a clean energy-related story because palladium is a key material used in catalytic converters that reduce automobile emissions.

But palladium’s stunning price rise has baffled some analysts, given the slowdown in the global automotive industry. Even so, the good times for palladium could end if the spread of COVID-19 puts a bigger dent in global auto sales.


China is the source and epicenter of COVID-19, so it’s surprising that the VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT) and Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS) are among the top-performing equity ETFs during the past month with gains of 7.5% and 7.2%, respectively.

Both products track the China A-shares market comprised of companies based in mainland China and listed on domestic exchanges in Shanghai and Shenzen. 

CNXT’s solid performance during this volatile period is mainly due to its focus on so-called “new economy” sectors compared to broad China benchmarks, coupled with its tilt toward small- and mid-sized companies, says William Sokol, ETF product manager at VanEck. 
“In particular, the strategy’s overweight to IT has provided the most outperformance, along with an underweight to financials,” he notes. “The strategy’s focus on non-state owned enterprises, which results in different company exposure versus the broad benchmark, has also helped performance.”

TAN, PALL, CNXT and ASHS have all posted positive returns during the past week's sell-off, versus a 7% drop in the SPY fund. At least for now, these funds have avoided the sick bay.