Markets were frenetic in 2020, as evidenced by a host of data points—most pointedly, the CBOE VIX Index closed above a level of 20 for 218 consecutive days in 2020, more days than the last eight years combined.1 Despite intense volatility, markets rallied significantly: The S&P 500® Index notched 33 new all-time highs and global stocks also closed the year at record highs.2
The standard 60/40 portfolio of global stocks and bonds returned 13%, helped by a rally in risk assets and duration-induced bond price appreciation amid falling yields.3 This marks the portfolio’s fifth double-digit return in the last 10 years. In the ETF industry, strategies range from broad to niche, enabling them to harness some of the out-of-this-world dispersion we witnessed in 2020. Three-month sector dispersion was, on average, in the 81st percentile in 2020, even topping out in 99th percentile a few times.4 Against this backdrop, how did ETFs perform in 2020? Let’s explore by considering two key charts.
2020 ETF performance: Thrusters turned on In a year of chaotic up and down days, ETFs had their thrusters turned on like a rocket taking off into space. 114 ETFs finished 2020 with returns greater than 50% and 23 ETFs posted returns greater than 100%—both record figures. When viewed as a percentage of existing funds, the totals translate to 5% and 1% of funds, respectively—also record levels.
As shown below, we have never seen returns like this before. Notably, most of these funds are long-only, non-leveraged ETFs, as only two of the 23 with 100% annual returns are levered ETFs. In other words, 2020 was a stratospheric success.