It is one of the hardest decisions (portfolio) managers must make. Which ETFs get the call up to a major tournament and which must, painfully, miss out.
ETFs have had a fantastic year. According to data from Bloomberg Intelligence, ETPs listed in Europe have seen €62bn inflows in 2022, as at 16 November, while mutual funds have seen outflows.
As with any starting XI, it is crucial to have a strong balance between defence and attack so the team has a chance of withstanding any market environment.
With the start of this year’s World Cup set to kick-off in Qatar on 20 November, ETF Stream has selected a starting XI of ETFs that we believe has a strong chance of beating any portfolio in the market.
GK – JP Morgan BetaBuilders US Treasury Bond 0-3 Months UCITS ETF (BB3M)
A strong football team is built from the back and having an ultra-short ETF between the posts is imperative in helping protect investors from market downturns and rising interest rates.
BB3M offers a pair of safe hands, and, like most modern-day goalkeepers, is comfortable on the ball and can turn defence to attack in an instant. The ETF’s resilient performance so far this year has nudged it into the starting XI, returning 0.9% in 2022.
RB – SPDR STOXX Global Low Volatility UCITS ETF (GLOW)
The defensive characteristics of low volatility have delivered some respite from soaring global inflation, recession fears and geopolitical headwinds.
GLOW, which tracks the STOXX Global Low Risk Weighted Diversified 200 index, has fallen just 11.6% so far this year versus returns of -18.7% for the MSCI All-Country World index (ACWI), meaning its defensive qualities are more suited to full-back.
CB – Invesco Physical Gold ETC (SGLD)
The stalwart of any defensive back line. Gold is the reliable old head drafted into portfolios when it is time to park the bus. Hampered by a strong US dollar, the asset class will be itching to prove itself at this tournament.
As the joint-cheapest gold ETC on the market, with a total expense ratio (TER) of 0.12%, the $15bn SGLD is our pick to play in the backline at this tournament.
CB – iShares Core Global Aggregate Bond UCITS ETF (AGGG)
Considered by some as the Rolls Royce of centre backs, AGGG’s return to fitness in the past month (5.2%) has come as a huge boost to the portfolio at the right time, while its $6.1bn assets under management show why AGGG is a real fan favourite.
With a TER of just 0.10%, AGGG offers exposure to the Barclays Global Aggregate Bond index of approximately 22,000 securities, a true piece a modern financial engineering that is perfect for any tournament.
LB – SPDR S&P US Dividend Aristocrats UCITS ETF (USDV)
After excellent form over the summer, USDV has more than earned its place in the starting XI this World Cup. The ETF has drawn in over $2bn assets this year, impressing with its ability to generate income during periods of extreme market stress.
USDV tracks the S&P High Yield Dividend Aristocrats index which only includes stocks that have increased their dividends every year for at least 20 consecutive seasons.
RM – Franklin FTSE Brazil UCITS ETF (FVUB)
No World Cup would be complete without a bit of Brazilian flair on the wing. The market also acts as a diversifier with its bias towards commodity-focused companies in South America’s largest country.
Despite a drop in form over the few weeks following a change in the manager, returning -6.5% in the last week, the market has had a strong performance this year, up 9.6%, earning FVUB a seat on the plane.
CM – Vanguard S&P 500 UCITS ETF (VUSA)
The central broad-beta option for any sensible investor portfolio.
The S&P 500 has had a bruising year, returning -18.3%. However, there are signs of a return to form in recent weeks as investors turn bullish on US changes ahead of the big tournament, posting returns of 6.6% in the past month.
CM – Xtrackers EUR Corporate Bond UCITS ETF (XBLC)
Another solid choice in the centre of the pitch, corporate bonds are another important component to a diversified midfield, complementing its equity-exposure neighbour, the S&P 500.
Tracking the Bloomberg Euro Corporate Bond index, XBLC gets exposure across the whole yield curve and has recorded an uptick in performance over the past month.
LM – L&G Multi-Strategy Enhanced Commodities UCITS ETF (ENCO)
Oh ENCO, oh ENCO, running down the wing! That is almost certainly what the fans will be screaming for the next few weeks.
ENCO, which tracks the Barclays Backwardation Tilt Multi-Strategy Capped index, has had a stellar year in terms of performance, returning 26% so far this year, and will prove a handful on the left-hand side.
ST – First Trust Nasdaq Cybersecurity UCITS ETF (FCBR)
The cybersecurity theme was a must-have earlier in the year after geopolitical events shined the light on the need for digital security.
Having lost form in recent months, FCBR will be hoping performance ticks up going into the tournament. The ETF tracks the Nasdaq CTA Cybersecurity index of 36 stocks and has $446m assets under management (AUM).
ST – Lyxor MSCI Emerging Markets Ex China UCITS ETF (EMXC)
Akin to the unpredictable big striker up top, emerging markets leading the line gives the portfolio the extra option for high growth and is an important diversifier for the squad, should developed markets not cut the mustard.
Leaving China out could be seen as a big call from the manager but one that values past performance (-17.9% so far this year versus -29.4% of the MSCI Emerging Market index), over future potential.