The Quarter’s Least Successful ETFs

Exchange-traded funds, or ETFs, are often low-cost instruments for investors to track popular indexes or leverage experienced manager choices in an attempt to beat the market. The best ones serve as building blocks for a portfolio, and unlike open-end mutual funds, all ETFs are traded throughout the day on an exchange.

In the third quarter of 2024, the worst performers included iShares S&P/TSX Capped Energy Index ETF XEG and Global X S&P/TSX Capped Energy Corporate Class ETF HXE. Data in this article is sourced from Morningstar Direct.

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Screening for the Worst-Performing ETFs

To find the quarter’s worst-performing ETFs, we screened equity, allocation, and fixed income funds that trade within Canada for those that have at least C$10 million in total assets. We narrowed the list to only ETFs with parent pillars for their Morningstar Medalist Ratings of average or above, meaning our analysts believe they’re backed by industry-standard asset management companies. We also excluded exchange traded notes, known as ETNs.

Among the worst-performing ETFs, two were from the energy equity category, where funds fell 2.78% in the third quarter.

The 10 Worst-Performing ETFs for Q3 2024:

1. iShares S&P/TSX Capped Energy Index ETF XEG
2. Global X S&P/TSX Capped Energy Corporate Class ETF HXE
3. Dynamic Active US Dividend ETF DXU
4. BMO MSCI Europe High Quality Hedged to CAD Index ETF ZEQ
5. Middlefield Innovation Dividend ETF MINN
6. Vanguard FTSE Developed All Cap ex Nrth Amer Idx ETF (CAD-Hdd) VI
7. Invesco NASDAQ 100 Equal Weight Index ETF QQEQ
8. Guardian i3 Global Quality Growth ETF Unhedged GIQG.B
9. Dynamic Active Global Dividend ETF DXG
10. iShares MSCI EAFE Index ETF (CAD-Hedged) XIN

Metrics for the Worst-Performing ETFs

iShares S&P/TSX Capped Energy Index ETF

• Morningstar Rating: 2 stars
• Expense Ratio: 0.60%
• Morningstar Category: Energy Equity

The worst-performing ETF in the third quarter was the C$1.5 billion iShares S&P/TSX Capped Energy Index ETF, which lost 6.32%. The passively managed iShares ETF fell further than the average 2.78% loss on funds in the energy equity category in the third quarter. Over the past 12 months, the iShares S&P/TSX Capped Energy Index ETF rose 1.26%, placing it in the 72nd percentile within its category and underperforming the 5.46% return on the average fund.

The iShares S&P/TSX Capped Energy Index ETF, launched in March 2001, has a Morningstar Medalist Rating of Silver.

Global X S&P/TSX Capped Energy Corporate Class ETF

• Morningstar Rating: 3 stars
• Expense Ratio: 0.27%
• Morningstar Category: Energy Equity

With a 6.24% loss, the C$96 million Global X S&P/TSX Capped Energy Corporate Class ETF was the second-worst performing ETF on our list for the third quarter. The passively managed Global X ETF fell further than the average 2.78% loss on funds in the energy equity category. Over the past 12 months, the Global X S&P/TSX Capped Energy Corporate Class ETF gained 1.64%, placing it in the 64th percentile within its category and underperforming the 5.46% return on the average fund.

The Bronze-rated Global X S&P/TSX Capped Energy Corporate Class ETF was launched in September 2013.

Dynamic Active US Dividend ETF

• Morningstar Rating: 2 stars
• Expense Ratio: 0.81%
• Morningstar Category: US Equity

The third-worst performing ETF in the third quarter was the C$122 million Dynamic Active US Dividend ETF, which fell 0.01%. The Dynamic Funds ETF, which is actively managed, underperformed the average 4.25% gain on funds in the US equity category. Over the past 12 months, the ETF rose 39.59% to place in the 12th percentile within its category, outperforming the category’s average 1-year return of 31.25%.

The Dynamic Active US Dividend ETF has a Morningstar Medalist Rating of Gold. It was launched in January 2017.

BMO MSCI Europe High Quality Hedged to CAD Index ETF

• Morningstar Rating: 5 stars
• Expense Ratio: 0.45%
• Morningstar Category: European Equity

The C$1.1 billion BMO MSCI Europe High Quality Hedged to CAD Index ETF was the fourth-worst performing ETF in the third quarter, with a return of 0.12%. The passively managed BMO ETF performed worse than the average 4.47% gain on funds in the European equity category. Over the past year, the ETF gained 17.86% to land in the 88th percentile within its category, underperforming the category’s average one-year return of 22.39%.

The Bronze-rated BMO MSCI Europe High Quality Hedged to CAD Index ETF was launched in February 2014.

Middlefield Innovation Dividend ETF

• Morningstar Rating: 4 stars
• Expense Ratio: 1.40%
• Morningstar Category: Global Equity

Fifth-worst was the C$97 million Middlefield Innovation Dividend ETF, which gained 0.28% in the third quarter. The actively managed Middlefield ETF fell short of the average 4.91% return on funds in the global equity category. Over the past year, the Middlefield Innovation Dividend ETF rose 53.67%, finishing in the 2nd percentile within its category. It outperformed the category’s average one-year return of 27.65%.

The Middlefield Innovation Dividend ETF has a Morningstar Medalist Rating of Bronze. It was launched in March 2018.

Vanguard FTSE Developed All Cap ex Nrth Amer Idx ETF (CAD-Hdd)

• Morningstar Rating: 4 stars
• Expense Ratio: 0.22%
• Morningstar Category: International Equity

The sixth-worst performing ETF in the third quarter was the C$406 million Vanguard FTSE Developed All Cap ex Nrth Amer Idx ETF (CAD-Hdd), which gained 0.43%. The passively managed Vanguard ETF underperformed the average 5.20% gain on funds in the international equity category. Over the past 12 months, the Vanguard FTSE Developed All Cap ex Nrth Amer Idx ETF (CAD-Hdd) rose 18.81%, placing it in the 83rd percentile within its category and underperforming the 22.22% return on the average fund.

The Vanguard FTSE Developed All Cap ex Nrth Amer Idx ETF (CAD-Hdd) has a Morningstar Medalist Rating of Gold. It was launched in December 2015.

Invesco NASDAQ 100 Equal Weight Index ETF

• Morningstar Rating: 2 stars
• Expense Ratio: 0.28%
• Morningstar Category: US Equity

With a 0.54% gain, the C$12 million Invesco NASDAQ 100 Equal Weight Index ETF was the seventh-worst performing ETF on our list for the third quarter. The passively managed Invesco ETF underperformed the average 4.25% gain on funds in the US equity category. Over the past 12 months, the Invesco NASDAQ 100 Equal Weight Index ETF gained 21.46%, placing it in the 93rd percentile within its category and underperforming the 31.25% return on the average fund.

The Invesco NASDAQ 100 Equal Weight Index ETF, launched in May 2021, has a Morningstar Medalist Rating of Bronze.

Guardian i3 Global Quality Growth ETF Unhedged

• Morningstar Rating: 3 stars
• Expense Ratio: 0.81%
• Morningstar Category: Global Equity

The eighth-worst performing ETF in the third quarter was the C$32 million Guardian i3 Global Quality Growth ETF Unhedged, which rose 0.57%. The Guardian Capital ETF, which is actively managed, underperformed the average 4.91% gain on funds in the global equity category. Over the past 12 months, the ETF rose 40.93% to place in the 5th percentile within its category, outperforming the average one-year return of 27.65%.

The Guardian i3 Global Quality Growth ETF Unhedged, launched in August 2020, has a Morningstar Medalist Rating of Neutral.

Dynamic Active Global Dividend ETF

• Morningstar Rating: 4 stars
• Expense Ratio: 0.83%
• Morningstar Category: Global Equity

The C$686 million Dynamic Active Global Dividend ETF was the ninth-worst performing ETF in the third quarter, with a return of 0.63%. The actively managed Dynamic Funds ETF performed worse than the average 4.91% gain on funds in the global equity category. Over the past year, the ETF gained 40.01% to land in the 5th percentile, outperforming the category’s average one-year return of 27.65%.

The Dynamic Active Global Dividend ETF has a Morningstar Medalist Rating of Gold. It was launched in January 2017.

iShares MSCI EAFE Index ETF (CAD-Hedged)

• Morningstar Rating: 4 stars
• Expense Ratio: 0.49%
• Morningstar Category: International Equity

Tenth-worst was the C$1.4 billion iShares MSCI EAFE Index ETF (CAD-Hedged), which gained 0.70% in the third quarter. The passively managed iShares ETF underperformed the average 5.20% return on funds in the international equity category for the quarter. Over the past year, the iShares MSCI EAFE Index ETF (CAD-Hedged) rose 19.17%, finishing the 12-month period in the 79th percentile within the international equity category. It underperformed the category’s average one-year return of 22.22%.

The Bronze-rated iShares MSCI EAFE Index ETF (CAD-Hedged) was launched in September 2001.

What Are ETFs?

Exchange-traded funds are investments that trade throughout the day on stock exchanges, much like individual stocks. They differ from traditional mutual funds – known as open-end funds – which can only be bought or sold at a single price each day. Historically, ETFs have tracked indexes, but in recent years, more ETFs have been actively managed. ETFs cover a range of asset classes, including stocks, bonds, commodities, and most recently cryptocurrency.

ETFs: More Ideas to Consider

Investors who would like to find more ETF investment ideas can do the following:

• Use the ETF Screener tool to find the best ETFs according to your specific criteria. You can search for funds based on their fees, Morningstar Medalist Ratings, manager tenures, and more.

• Find ideas specific to your needs, or learn more about ETFs, on our ETF Insights page.

• Compare funds and ETFs side by side and easily follow their valuations, ratings, and fees.

This article was compiled by Bella Albrecht, edited by Lauren Solberg, and reviewed by Andrew Willis.

This article was generated with the help of automation and reviewed by Morningstar editors.

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