October came and went, and in the exchange traded product (ETP) space, cryptocurrencies climbed to the top of the list. Last month, the best performer was Bitcoin Tracker One XBT Provider (0PTL) which gained 31.5% and surpassed other well performing categories like natural gas and gold.
The long crypto winter has been tough for all cryptocurrencies, with BTC losing approximately 65% of its market value and a series of unpredictable events such as the Terra Luna crash, and the FTX fall taking investors by surprise. However, the start of 2023 was strong, and so was October.
In fact, October was the second most positive month of the year for the entire crypto universe after January, so much so that it was nicknamed “Uptober” by the crypto investing community. Bitcoin, for its part, recorded the highest monthly close since May 2022, reaching $33,334.
The gains have been buoyed by renewed institutional interest, as well as hopes that an upcoming “halving” event will spark another record-breaking bull run. Scheduled to take place in April 2024, the event will see the production of bitcoin cut in half as part of an anti-inflationary measure: since 2020, the network participants validating transactions have been awarded 6.25 bitcoins (BTC) for each block successfully mined; with the halving the block reward will fall to 3.125 BTC.
We move on to another high returner in the top 12: WisdomTree Natural Gas (NGAS) surged 14% last month. Changing weather forecasts continue to be the main factor behind movement in natural gas. The market heads into the winter heating season and prices have gained traction. Back in late May, natural-gas futures were trading down by nearly 50% year to date.
Furthermore, the US Energy Information Administration (EIA) reported a less-than-expected increase of 74 billion cubic feet (bcf) in gas storage for the week ending October 20, fuelling the bullish sentiment.
Finally, gold experienced an October rally that has brought the price of an ounce of the yellow metal to the cusp of the $2,000 mark, a level it hasn’t seen since May, pushed by a continued decline in Treasury yields and above all the safe-haven demand amid the escalating conflict in the Middle East. We noticed the same trend among the top performing funds in the UK for the month.
The Laggards
Topping the ranking of the worst performing ETFs in October, we again revisit the Electric Vehicle Charging Infrastructure UCITS ETF Acc (ELEC), which shed 31% in the month and now almost 71% over the past year. This is followed by the First Trust Nasdaq® Clean Edge® Green Energy UCITS ETF (QCLU) and the Invesco Solar Energy UCITS ETF (ISUN), which lost 21% and 19%, respectively.
The entire ranking is packed with thematic strategies related to the energy transition in various ways. The main reason is that the renewable energy sector is particularly vulnerable to rising interest rates as many companies enter into long-term contracts, setting the price at which they will sell energy before developing their projects. As global inflation has soared, green energy companies have been hit by huge cost increases while high rates have made debt levels more expensive to manage.
Indeed, restrictive monetary policy aimed at fighting inflation has made raising finance very expensive, leading to an increase of up to 33% in the cost of producing electricity from new plants powered by renewable sources such as solar and wind energy.
The Biggest ETFs
Monthly top and flop performers often coincide with very volatile and therefore risky products, which should play a satellite role in your portfolio. As such, we also include an overview of the biggest European-domiciled ETPs in terms of assets, which could be more appropriate to consider among core holdings. Performance in October 2023 range from +7.4% for the iShares Core € Corp Bond UCITS ETF EUR (IEAC) and the Invesco Physical Gold ETC (SGLD), down to the iShares Core FTSE 100 UCITS ETF GBP (ISF), which lost 3.7%.
Methodology
According to Morningstar data, there are around 62 percentage points between the best and worst performing Exchange-traded products (ETPs) in October, with returns for the month ranging from 31.5% to -31%.
We have looked at the key trends in the tenth month of the year, excluding inverse and leveraged funds. These instruments, being purely passive products, reflect the evolution of the markets without the bias (good or bad) of an active manager.
