The Globe and Mail

WHAT ARE WE LOOKING FOR?

Exchange-traded funds with the most momentum this year.

ETFs are like mutual funds, but trade like stocks. If you make the right bet on a market trend, you can ride it for a while and jump off easily.

Unlike mutual funds, ETFs don't charge an early redemption penalty. While you pay fees to buy and sell them, they can be low if you get them through a discount broker.

TODAY'S SCREEN

We checked the year-to-date returns to April 16 for ETFs listed on the Toronto Stock Exchange. The iShares ETFs, for instance, mimic both traditional and specialty indexes while Claymore ETFs focus on specialty indexes. And the Horizons BetaPro bull and bear plus ETFs, respectively, offer double the daily gain and double the daily loss of the indexes and commodities they track.

WHAT DID WE FIND?

There were ways to make nice money if you bet on everything from falling gas prices to the energy and technology sectors.

The HPB NYMEX Natural Gas Bear + ETF gained a stunning 101 per cent as the price of the commodity headed south. It tracks the New York Mercantile Exchange (NYMEX) natural gas futures contracts.

Investors have actually done better than twice the 37-per-cent decline in natural gas futures due to daily rebalancing in the ETF, said Howard Atkinson, president of BetaPro Management Inc. “Think about an annual compounding GIC, but this happens on a daily basis.”

Because the natural gas market was moving in a bearish or declining trend since the beginning of the year, “investors benefited from our product from the compounding,” he said.

“When our ETFs are range-bound, and not going anywhere in particular, that works against the investor,” he warned. “It's just the way the math works in daily rebalancing and leverage.”

Rising oil prices to the $50 (U.S.) per barrel level have helped energy sector ETFs. Claymore Oil Sands Sector ETF, which tracks the Sustainable Oil Sands Sector Index's 17 holdings, has risen 27 per cent. The iShares CDN Energy Sector ETF, which tracks the more diversified S&P/TSX Capped Energy Index of 45 stocks and energy trusts, is only up 11 per cent.

Investors have also done well in an ETF that tracks Canadian technology stocks. The iShares CDN Tech Sector ETF, which follows the S&P/TSX Capped Information Technology Index, has risen 26 per cent so far this year. Lest you rush out and buy this fund, be aware this index only includes five names: Research In Motion, CGI Group, Open Text, Celestica and MacDonald Dettwiler and Associates. Because BlackBerry maker RIM makes up 30 per cent of the index, its stock will have an impact on how this ETF performs. Its shares have run up 68 per cent so far this year.

Interestingly, the iShares CDN Jantzi Social Index ETF, which tracks an index of securities chosen for a higher environmental and social standard, is up 11 per cent versus 4 per cent for the overall Canadian market. Social responsibility, it seems, can pay dividends.

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