The Top 20 ETF Melt Up Candidates For Year End

It’s that time of year for holiday music, colder weather and the odd investing phenomenon known as window dressing to take place. For some reason, some money managers begin to purchase the best performing securities of the year towards the end of the year causing these top performers to melt upward in price. This historic trend, dubbed window dressing, is supposed to occur because money managers know that investors review the holdings in their portfolios at year end and compare them to the best performing securities in the marketplace that year. Presumably money managers want to demonstrate they owned the best performers — even if only for a short time. Thus they “dress” their portfolio before the year end portfolio snapshot (window) takes place. Yes Virginia, we live in an odd investment world…

I thought it would be interesting to take a look at the top 20 ETF/ETN melt up candidates this year. Doing so may provide a way to gauge the melt up affect on ETPs (exchange traded portfolios) and even yield a few investment ideas. After the break, I’ve compiled the latest year to date ETP performance report from Index, which I believe has the cleanest ETP data in the industry. This report includes all ETPs, except leveraged and inverse products, and is sorted by year to date performance. Click through the break to view the performance chart and associated observations…

There are a variety of interesting observations from this chart compiled on November 29, 201o using Index Universe’s free data application tool.(click link for full report output)

First there were more top performing equity ETPs (12) than commodity ETPs (8). Of the 12 top performing equity ETFs, seven were ex US country specific ETFs and an additional four were dominated by US focused holdings. The final one focused on commodity related equity companies.

Secondly, of the eight ETPs on the commodity side, five were ETNs, two were trusts and one was a fund. Half of the eight top performing commodity ETPs were related to silver. Of the other four commodity ETFs, three were soft commodities. None of the top performing commodity ETPs were related to Gold.

Finally, from a sponsor perspective, iShares lead the pack with six of the Top 20 performing ETPs this year which seems consistent from a market share perspective. iShares was followed by perennial commodity leader iPath at four. The overachieving MarketVectors, Invesco and HOLDRS followed at two a piece. Global X, Guggenheim, UBS and ETF Securities rounded out the list at one a piece. What is surprising here is to see the lack of “leading ETF sponsor” (State Street and Vanguard for example) names showing up in the Top 20. This is especially the case with more equity ETP’s leading the performance pack than commodities. In addition, this data showcases the deep access to markets around the world that iShares has created.

Will window dressing and the associated melt up help the ETP’s listed above? We shall see, with about a month left in 2010.