Exposure to commodities has paid off, but there are plenty of other sectors that have performed well.
This year saw growing concerns about climate change and the environment. As a result, more funds offering exposure to the environmental, social and governance (ESG) theme were launched, and record amounts of money flowed into ESG funds.
But despite this backdrop, by far the best-performing exchange-traded funds (ETFs) were those with exposure to fossil-fuel production.
The strongest performance came from the iShares Oil & Gas Explr&Prod ETF (LSE:IOGP), with a return of 79.2% year-to-date (to 8 December), in sterling terms (as all returns will be). As the name suggests, it provides exposure to an index composed of companies involved in the exploration and production of oil and gas. Its biggest holding currently is ConocoPhillips (NYSE:COP), Alaska’s largest crude oil producer.
Next up were ETFs tracking the US energy sector. The iShares S&P 500 Energy Sect ETF (LSE:IUES) and the Invesco Energy S&P US Select Sector ETF (LSE:XLEP), both returned 62%. Following closely behind were ETFs using the MSCI version of this energy sector index to gain exposure to US energy companies, with the Xtrackers MSCI USA Energy ETF (LSE:XUEN) returning 59%.
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When it came to global energy sector ETFs, returns were lower than those found in the US, albeit still strong. The Xtrackers MSCI World Energy ETF (LSE:XDW0) provided a return of 47.6%. Both the Lyxor MSCI World Energy TR ETF (LSE:NRGW) and the Amundi IS MSCI World Energy ETF (LSE:CWEG) provided similar returns.
Another lucrative way to profit from the oil and gas price surges in 2021 was through energy infrastructure. The L&G US Energy Infrastructure MLP ETF (LSE:MLPI) returned 44.7%. This was closely followed by the Invesco Morningstar US EnrgInfrMLPETF (LSE:MLPS), with a return of 41.5%. Similar performance was also demonstrated with the Alerian Midstream Energy Dividend ETF (LSE:MMLP), which returned 39.8%.
ETFs tracking the markets of countries dominated by oil and gas also did very well. The Invesco MSCI Saudi Arabia ETF (LSE:MSAP), for example, returned 37.9%.
Even better, however, was the Xtrackers MSCI GCC Select Swap ETF (LSE:XGLF), with a return of 40.7%. This ETF tracks an index of a group of Middle Eastern countries that are part of the Gulf Cooperation Countries, including Saudi Arabia, the UAE, Kuwait, Qatar, and Bahrain.
The Lyxor MSCI Russia ETF Dist (LSE:RUSL) returned 33.3%. Russia’s economy and stock market is also heavily reliant on oil and gas production and sales.
Another sector that performed well in 2021 was financials. As with energy, US financials ETFs outperformed their global equivalents. The SPDR® MSCI World Financials ETF (LSE:WFIN) returned 31.2%. In comparison, the iShares S&P 500 Financials Sect ETF (LSE:IUFS) returned 38.6%. Even better was the Xtrackers MSCI USA Banks ETF (LSE:XUFB) with a return of 40.7%.
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Private equity became an increasingly popular asset class in 2021, while also seeing strong returns generally. ETF investors were able to gain access to this through the iShares Listed Private Eq ETF (LSE:IDPE), which provided a return of 44.8%. The ETF invests in private equity firms that are publicly listed, such as Blackstone (NYSE:BX) and 3i (LSE:III).
Bitcoin and other cryptocurrencies have also continued to grow in popularity this year. The Invesco CoinShares Global Blockchain ETF (LSE:BCHN) was another strong performer, returning 37.3%. The ETF tracks an index composed of companies involved in cryptocurrency mining and exchange, as well as firms exploring the use of blockchain technology.
US tech ETFs were also strong performers. The Invesco Technology S&P US Sel Sec ETF (LSE:XLKS) returned 37.2%, while the Invesco EQQQ NASDAQ-100 ETF (LSE:EQQQ) returned just under 32%. Consumer discretionary also excelled, with the Invesco Consumer Discr S&P US SelSec ETF (LSE:XLYS) returning 34%.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.