Best and worst performing ETFs this year

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Best and worst ETFs in 2014

Best & worst ETFs in 2014

CNBC’s Bob Pisani discusses what was behind the strong performance of biotech ETFs in 2014 and if the NYSE will be sold off in 2015.

The exchange-traded fund winners this year were biotech and mainland China. It was a home run for biotech across the three largest ETFs.

SPDR Biotech, an equal-weighted index of U.S. biotech stocks, is up 43.5 percent for the year.

First Trust Biotech ETF, another equal-weighted index, has also been a big performer, up 49.5 percent.

Finally, the iShares Nasdaq Biotech ETF, which is weighted by market capitalization, also had a great year, up 35 percent, but not as strong as the two equal-weighted indexes. That’s because some very small names in biotech had a phenomenal year, and when that happens equal weighted indexes tend to do better.

Elsewhere, the relatively small group of ETFs that invest in mainland China had a big year, thanks to a surge in interest in trading mainland China shares after that country made it easier for foreigners to invest in November (which I previously noted in Trader Talk).

Mainland China ETFs 2014:

PowerShares China A-Shares up 54.6 percent
db x-trackers up 46.6 percent
Market Vectors China up 40.9 percent

Two problems here: these funds are all very small, and more importantly, China growth has slowed down this year. That has been reflected in the performance of the Hong Kong Hang Seng Index, which is often used as a proxy for mainland China growth and was up only 2 percent.

Other top performers included REITs like the Cohen & Steers REIT, up 31.4 percent, and Vanguard REIT Index, up 27 percent.

The worst performers were commodities and Russia.

Market Vectors Russia down 44.6 percent
Vanguard Natural Resources down 43.3 percent
PowerShares DB Oil Fund down 41.4 percent
Market Vectors Steel down 28.9 percent
SPDR Oil & Gas E&P down 28.8 percent

Elsewhere:

1) There’s an article in the New York Post that Intercontinental Exchange may sell the New York Stock Exchange in 2015. The story only cites a London-based analyst but insists that a recent drive to make the NYSE more profitable (ICE has eliminated a large layer of middle management) was “window dressing” that could presage a sale or closing of the NYSE trading floor.

Predictions of the imminent demise of the NYSE floor have occurred every single year since Dick Grasso left in September 2003. Jeff Sprecher, the CEO of ICE, has said he has no plans to sell the NYSE and has recently made remarks about investing more in the NYSE. He has been very active in calling for changes in the way payments are made to those trading on exchanges.

Here’s the official response from the NYSE: “While we are working to improve the business, the conclusion in the article that it is up for sale is untrue, and is in conflict with our recent statements about integrating and investing in the NYSE.”

Sprecher was most recently asked about his plans for the NYSE at a Goldman Sachs conference on Dec. 10. Here’s what he said:

” … we really believe we can grow earnings out of the New York Stock Exchange. We have done it already by cutting costs, streamlining the business, reorganizing it, revisiting pricing.

And right now we’re making a huge investment, a huge amount of energy, at least, into the investment of all new technology to replace all the legacy systems inside the NYSE that will make it even easier and simpler and cheaper to operate better I think experience for our end users.”

Sprecher went on to say, “we’re not afraid to exit businesses where we think we’ve performed our magic and should move on. But for now, that is a really great EPS growth company.”

My own feelings: I said when the ICE deal to buy the NYSE was announced exactly two years ago that revenues from equities trading would be a small part of the overall revenues of the combined ICE-NYSE entity (roughly 6 percent), and that if that did not improve a sale was possible a few years down the road. I still believe that is possible, but not in 2015.

The problem: Who is the likely buyer? Unless a high frequency firm was interested, the only logical buyer would be BATS. Regulators would certainly block a Nasdaq-NYSE merger on grounds that the listing business would be a monopoly.

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Best and worst performing ETFs this year