The best performing exchange traded product (ETP) in April was the WisdomTree Natural Gas ETC (NGAS), which gained more than 34 percentage points for the month. The European gas market is in turmoil after Moscow decided to cut off supplies to Bulgaria and Poland, pushing up prices strongly.
As pointed out by Morningstar Germany editor Antje Schiffer, Europe's gas storage facilities were emptier than usual this winter given the time of year, even before the Russian attack on Ukraine. Fear has ruled the market since February 24. Investors are anxious that Europe will add gas to its list of sanctions, or that Russia will simply turn off the gas supply across the continent.
Another direct consequence of the war is the rise in the prices of agricultural commodities, particularly soybeans, of which Russia is a major producer. Sanctions on Russia are playing a role in several harvesting regions, including major producers as Argentina, Brazil and Paraguay, where a shortage of diesel is impacting harvesting and truck transport between the fields and the ports. Only five months ago the US Department of Agriculture was still forecasting that global soybean producers would grow a surplus of 5 million tons. Now, this has been revised to a deficit of 2 million tons.
Finally, among the best performers of the month there were two trackers of the VIX index, also known as the “fear gauge”. This tracks the S&P 500 VIX Futures Enhanced Roll Index, a benchmark that offers exposure to the expected implied volatility of the S&P 500, and that it is typically used by investors to measure market risk, fear and stress.
The Laggards
ETFs exposed to digital assets, as blockchain or cryptocurrencies suffered heavily in April. 21Shares Fantom ETP (AFTM) was the biggest detractor within the ETFs universe, shedding 35%. This fund, launched on March 16, is designed to give investors a way to invest in the Fantom token that powers the Fantom blockchain, a platform for DeFi (decentralised finance), dApps (decentralised apps) and enterprise applications.
April was a difficult month for the crypto world, with sell-offs across the board. Ignoring stablecoins, the token that fell the least in April was BNB (Binance coin). The crypto, which is used as both BNB Chain’s native currency and as an exchange coin on Binance, fell almost 13% for the month.
ETFs exposed to e-commerce and Chinese equity also suffered.
Russian equity ETFs are suspended from trading until further notice, although this decision was not taken simultaneously by all European stock exchanges. The SIX Swiss Exchange in Zurich, for example, froze them on March 8, four days later than Euronext, Borsa Italiana, Deutsche Boerse and the London Stock Exchange.
While waiting to find out the fate of these strategies, this puts the question of greater harmonisation of the European ETF market back on the table. Issuers themselves may even decide to stop offering them through a liquidation – many institutional and private clients might no longer want to hold Russia, either from an ESG perspective or to comply with sanctions.
The Biggest ETFs
Below is a overview of the biggest European-domiciled ETPs in terms of assets, which could be more appropriate to consider among core holdings. Performances in April 2022 go from 3.8% of the iShares Physical Gold ETC (IGLN) down to the iShares Core S&P 500 UCITS ETF (CSP1), the Vanguard S&P 500 UCITS ETF (VUSD) and the iShares Core S&P 500 UCITS ETF (IDUS); all of them lost 3.7% last month.
Methodology
According to Morningstar data, there are about 70 percentage points between the best and worst performing European exchange-traded products (ETPs) in April, with returns for the month ranging from 34.3% to -34.9%.
We have looked at the key trends in the third month of the year, excluding inverse and leveraged funds. These instruments, being purely passive products, reflect the evolution of the markets without the bias (good or bad) of an active manager.
Monthly top and flop performers often coincide with very volatile and therefore risky products, which should play a satellite role in your portfolio.
