The 10 biggest rises and falls of ETFs in the 1st half of 2022; Fixed income and dividend funds stand out

The global rise in interest rates and inflation and the risk aversion of investors had a strong influence on the performance of index funds (ETFs) in the first half of 2022.

Cryptocurrency and technology theses – highly correlated with each other – felt the impacts to the surface, leading the drops, which reached almost 75% between January and June.

On the other hand, the best performances were those of fixed income ETFs and those that bring together companies that pay good dividends or the financial sector. There was also room for ETFs that track indices of real estate funds.

In the balance of ETFs for the first half of 2022, the InfoMoney presents the index funds with the best performance and the ones that have depreciated the most, according to a survey by Einar Rivero with data from the Economatica platform.

B3’s ten best performing ETFs in the 1st half

ETFReturn
in the semester
B5P2117.73%
IMAB116.81%
IMBB114.93%
DIVO114.79%
IB5M113.85%
B5MB111.55%
IRFM111.40%
FIND111.16%
FIXED 110.32%
XFIX110.20%

Source: Economatica

Fixed-income ETFs were the highlight

The biggest rise of the semester was ETF B5P211. This replicates Anbima’s IMA-B 5 P2 index, composed of IPCA+ and IPCA+ Treasury bonds with semiannual interest, maturing in up to five years. The B5P211 accumulated a high of 7.73% in the semester.

And it was followed by IMAB11 and IMBB11, which advanced 6.81% and 4.93%, respectively. Both ETFs replicate the performance of the IMA-B index, investing in IPCA+ and IPCA+ Treasury bonds with semi-annual, short and long-term interest.

In the list of the best performers, it was also possible to find ETFs that guarantee exposure to fixed interest rates and Selic-linked securities, in addition to theses related to long-term inflation bonds.

According to Felipe Paletta, founding partner and analyst at Monett, all these ETFs benefited from the acceleration in interest rates during the first half of the year. Those who invest in inflation papers also ended up benefiting from the increase in the unit price of bonds, which, with the end of the monetary tightening cycle, appreciated in value. Paletta also highlights that inflation surprised throughout the semester.

Faced with a scenario of uncertainty, he sees as an opportunity fixed-income ETFs that bring together inflation-linked securities maturing in more than two years. “Buying short terms seems risky to me, mainly because of a reduction in short-term inflation,” he says.

Dividends and the financial sector

Still following the movement of high interest rates, ETFs composed of shares of companies that pay dividends and the financial sector were also benefited.

The DIVO11 ETF, which replicates the performance of the Dividends Index (IDIV), had the fourth highest increase in the semester, with gains of 4.79%.

According to Thiago Gomes, specialist in ETFs and creator of the ETF for All platform, the sectoral composition of DIVO11 is divided as follows: electricity (38%), banks (20%), metallic minerals (9%), insurance companies (5% ) and telecommunications (5%). Other sectors account for 23% of the index fund’s portfolio.

Looking at the individual composition, the main position is Eletrobras (13%), followed by Vale (7%), Vivo (5%), BB Seguridade (5%) and Itaúsa (4%). Gomes explains that the appreciation in the semester was driven by the performance of Eletrobras, since ELET6 jumped 47.04% in the year, favored by privatization.

Survey of InfoMoney points out that in the last five years the company was one of the most profitable investments, surpassing the performance of the Ibovespa.

Gomes reinforces that the challenging macroeconomic scenario made investors prefer assets with greater predictability of cash generation, to the detriment of growth assets or assets linked to the domestic economy. “DIVO11’s sectoral composition helps to understand its prominent position in the first half of the year”, quotes the specialist.

He believes that DIVO11 could have returned better in the half, given that in the first quarter it shot up about 18%, but ended up returning the gains following the sharp drop in global stocks.

Another ETF that appreciated was FIND11, up 1.16% in the first half. This fund follows the B3 financial index (IFNC), composed of shares of financial intermediaries, banks, pension plans and insurance. “The financial sector is recognized for being a strong cash generator and has historically performed well in an environment of high interest rates, which is the current Brazilian scenario”, says Gomes. According to the specialist, the good performance of the ETF was driven by the rise in shares of Banco do Brasil (BBAS3), which appreciated 22.11% in the semester.

Read too:

• Dividend ETFs such as DIVO11 do not distribute dividends; so what are they for?

• ETFs that pay dividends may reach the Brazilian stock exchange by the end of 2022

• Do ETFs pay dividends? Learn all about index fund returns

The ten worst performing B3 ETFs in the 1st half of 2022

ETFReturn
in the semester
QETH11-74.77%
ETHE11-74.19%
HASH11-67.10%
QBTC11-62.87%
BITH11-62.60%
SHOT11-54.59%
TECB11-50.57%
BTEK11-40.85%
TECK11-38.68%
DNAI11-36.67%

Source: Economatica

crypto winter

The worst performers of the semester were cryptocurrency ETFs, which replicate the performance of Ethereum, Bitcoin or also a basket of cryptoassets.

The biggest drop was QETH11, the ETF of the manager QR Asset, which follows the performance of Ethereum. The index fund accumulated a decrease of 74.77% in the semester. In second position was also an ETF focused on Ethereum, but from the manager Hashdex, ETHE11, down 74.19%.

In the third position, HASH11 had a drop of 67.10%. The ETF is the second largest in B3 shareholders, behind only the IBVV11, which replicates the S&P 500 index. In its asset basket, HASH11 brings together 11 cryptocurrencies from different segments.

According to Ray Nasser, CEO of Bitcoin mining company Arthur Mining, the drop in cryptocurrency ETFs is justified by investors’ risk aversion to technology assets in a scenario of high interest rates. He explains that cryptocurrencies are seen by investors as a risky asset linked to the tech segment and very correlated with American companies.

He recalls that stocks such as Netflix, Facebook and Amazon all fell by more than 40% in the semester, while crypto assets such as decentralized finance (DeFi), smart contracts, Web3 and Bitcoin fell 60% or more.

Liquidity also affects, cites Nasser. “The cryptocurrency industry has half a trillion dollars of liquidity, versus $100 trillion for the global stock market,” he points out.

For Helena Margarido, cryptocurrency analyst at Monett, cryptocurrency ETFs still follow the movement of interest rates and global inflation, which reduces investors’ risk appetite.

In the short term, the analyst does not see a reversal perspective in this downward movement. “The problem is a macro one, but I believe that interest rate cooling is near due to the recession in the United States, which should make the Federal Reserve review its policies”, she assesses. Helena believes that only when interest rates started a downward movement should cryptocurrency ETFs present chances of recovery.

Technology still suffers

Technology ETFs were also among the top ten worst performers of the semester.

Fabio Louzada, CNPI investment analyst and CEO of Eu me banco, explains that technology stocks have part of the gains projected in the future – and consequently, the higher the interest rates, the smaller the gains for companies down the road. “Tech stocks were priced higher precisely because they projected high gains and ended up suffering from the prospect of higher interest rates,” he says. The cost of more expensive financing, after all, reduces profits.

Among the technology ETFs that fell the most in the semester, the highlight is SHOT11 and TECB11, which accumulated losses of 54.59% and 50.57%, respectively.

The SHOT11 ETF replicates the S&P Kensho Moonshots index, calculated by the S&P. The analyst cites that among the largest positions in the ETF are companies such as MicroVision, Vuzix, ExOne and Immunity, which showed a sharp drop.

MicroVision’s shares, for example, fell by more than 50% in January, one of the worst months for the Nasdaq index, due to the Fed’s (Federal Reserve, US central bank) signaling an interest rate hike starting in March. .

“Looking at the next six months, interest rates should continue to rise. We saw that the BC is more concerned about inflation than a future recession, and that should continue to affect tech companies,” he says.

In TECB11, Louzada mentions that the main companies in the basket are TOTS3, MGLU3, BIDI11, STOC31, [ativo=MELI31] and PAGS34, which also suffered from high interest rates. According to the analyst, the election period should affect these segments even more, so it would not be a good time to enter the index fund.

Also check out the five best and worst performing B3 ETFs specifically during the month of June 2022:

Source: Economatica

Source: Economatica

ETF Radar

Arthur Maria do Valle, founder of Trendset and associated with OhmResearch, raised for the InfoMoney the main news that the Brazilian ETFs market presented in the first half of 2022. Several index funds were launched, mainly thematic and sectorial, of local and international assets. Most, according to Valle, were cryptocurrency ETFs, with management fees well above those of conventional ETFs.

According to data from Economatica, 14 new ETFs hit the Exchange in 2022, of which seven are cryptocurrencies, which accompany theses related to decentralized finance, NFTs, Web3, metaverse and smart contracts. “Most of the launches were made by managers that recently entered the market, such as Investo, Hashdex and QR Capital”, highlights Valle.

Empiricus also entered this space in May with the launch of CRPT11, a cryptocurrency ETF similar to HASH11.

The debut of new cryptocurrency ETFs coincided with a period of poor performance for the category. According to Valle, the probable cause is the time required to create, approve, launch and distribute an ETF in Brazil. The managers, in his view, were taken by surprise by the bad moment of the market, while ETFs like CRPT11, NFTS11 and WEB311 were coming out of the oven.

Valle also highlights the arrival of new BDRs (Brazilian Depositary Receipts) of international ETFs, focused on fixed and variable income, but with low liquidity – and, therefore, less competitive compared to ETFs, which have greater liquidity, despite a higher management fee than that of BDRs.

According to the experts, sectoral and thematic ETFs tend not to perform better in the long term than broad index funds – which, in his view, are lacking in the local market. “We have many repeat ETFs that follow the Ibovespa index or the S&P 500, but we still don’t have any more ETFs that follow the IBRX or any index for the entire American market.”

Regarding management fees, Valle recalls that the manager Investo announced a reduction in five of its ETFs since Tuesday (28). Valid for USTK11, ALUG11, JOGO11, 5GTK11 and BTEK11. Cauê Mançanares, CEO of Investo, said that the manager’s new international fixed income ETFs, scheduled to debut in July, will have a rate of 0.25% per year.

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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