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What are we looking for?

The most profitable Canadian-listed ETFs in the third quarter.

The screen

We sifted through the ETFs for the top 15 returns for the three months ended Sept. 30. ETFs that can short or bet against a sector or market, and leveraged ETFs, which can amplify long and short bets, were excluded.

What did we find?

Commodity ETFs back in vogue again.

Resource stocks rebounded as central banks in the United States, Europe and Japan pledged a ton of new stimulus to kick-start their sluggish economies. The energy sector also got a lift as the price of oil climbed on concerns over unrest in the Middle East.

BMO Junior Gold ETF led the pack with a 22.6-per-cent gain amid speculation and then confirmation last month that the U.S. Federal Reserve Board would embark on a third-round of quantitative easing (QE 3), or money printing.

As fears of inflation and debasement of currencies sent the price of gold surging, investors renewed their enthusiasm for beaten-up miners. "When gold prices are rising in a steady trend ... small-cap companies offer the best way to play the momentum," said Alfred Lee, an investment strategist with BMO ETFs at BMO Global Asset Management.

Power Shares S&P/TSX Composite High Beta ETF, which can offer higher returns than the broader domestic stock market when it is rising, was flying high. It gained 15.3 per cent versus 7 per cent for the Canadian market. The outperformance was not too surprising given that this ETF is essentially a resource fund. Materials and energy stocks make up 98 per cent of the fund. Big gainers included names like Oceana Gold, up 67 per cent; First Majestic Silver, 55 per cent and Bankers Petroleum, 66 per cent.

BMO Equal Weight U.S. Banks ETF (hedged to Canadian dollars), which climbed 10.4 per cent, was the outlier. U.S. bank stocks rallied as euro-zone leaders pledged to deal with its debt woes, thus erasing fears of dragging American financial institutions into the European banking crisis. Bank stocks also surged on expectations of a recovering U.S. economy and signs of stabilization in the housing market.