Top Performing Canadian ETFs in 2020

It was a year of low-cost rocket ships – here are the top ten

Andrew Willis 30 December, 2020 | 4:28AM
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Investors that dared to go aggressive in the digital space this year either got lucky or correctly anticipated the accelerated demand for new technologies brought on by the pandemic. And investors in the top-performing exchange traded funds (ETFs) of this year found themselves invested in the tech innovation that made it possible for us to be productive in this socially distanced world.  

Let’s look at some of the top performers. To compare these ETFs, we’ll look at their returns to date, the cost of performance with the Management Expense Ratio (MER) and lastly combine these factors in a bigger view – the forward looking Morningstar Quantitative Rating.

“The Morningstar Quantitative Rating, or the ‘Medalist’ rating, is a forward-looking assessment of a fund’s prospective ability to outperform similar funds,” explains Morningstar Canada’s Director of Investment Research, Ian Tam. Medalist ratings are based on five factors: people (the quality of management team), process (the effectiveness and consistency of the investment process), parent (organizational structure and talent retention), performance, and price (fees).

First, here’s the list of the 10 top-performing ETFs:

Name  YTD Return (%) Management Expense Ratio (%) MQR
Emerge ARK Genomics & Biotech ETF (EAGB)   156.36  1.70 Neutral 
Emerge ARK AI & Big Data ETF (EAAI) 137.28  1.68   Neutral 
Emerge ARK Global Disruptive Innovation ETF (EARK)  126.85  1.70  Neutral 
Blockchain Technologies ETF (HBLK)  130.70  1.99  Negative 
BetaPro Crude Oil Inverse Leveraged Daily Bear ETF (HOD)  109.54  1.40  Neutral 
Emerge ARK Fintech Innovation ETF (EAFT)  98.01  1.66  Gold 
Horizons Big Data & Hardware ETF (HBGD)  94.65  0.71  Gold 
Evolve Automobile Innovation ETF Unhedged (CARS.B)  86.16  0.64  Neutral 
Emerge ARK Autonomous Technology & Robotics ETF (EAUT) 97.06  1.68  Gold 
Evolve E-Gaming ETF (HERO)  62.00  0.99  Negative 

Morningstar Direct Data as of Dec 16, 2020

You might have recognized the word ‘ARK’ dominating the leaderboard this year. That is indeed the ARK Invest headed by the legendary portfolio manager, Cathie Wood. Emerge Canada got a great deal in getting ETFs sub-advised by ARK Investment Management with all its domain expertise in booming sectors. However, for Canadian investors, the fees could be a deal-breaker considering you can find U.S.-listed ETFs more directly advised by Wood for an MER of around 0.75%. The U.S.-based funds at ARK Invest will be mentioned for comparison.

Emerge ARK Genomics & Biotech ETF (EAGB), comparable to ARKG, topped the charts after investors came to appreciate advances in biotechnology when needed most in healthcare. A revolution in the way and speed at which we decode genetic material means an exponential growth in applications – from tailored medicine to hereditary disease prevention.

Emerge ARK AI & Big Data ETF (EAAI), comparable to ARKW, took advantage of our massive shift to online living by targeting services and new technologies that form the backbone for our digital world. As of September 30th, 2020, the fund had more than 10% in Tesla (TSLA), in line with the company’s transformation from an automaker to a technology company.

Emerge ARK Global Disruptive Innovation ETF (EARK), comparable to ARKK, is sector-agnostic in targeting innovative companies – as long as their innovations are disruptive. There is some overlap between this ETF and others in the suite (ie. lots of Tesla), but this one’s a great variety of potentially game-changing businesses.

In fourth place, Harvest’s Blockchain Technologies ETF (HBLK) is not a bitcoin fund, but an ETF that invests largely in technology companies, at around 71% of the portfolio on November 30, 2020. For the fees of this fund, investors should consider whether the gains were from a broad bullish tech market or a blockchain-driven boom.

The words ‘inverse’ and ‘leverage’ should be enough to dissuade any beginner or long term traders, but for professionals who picked it up at just the right time for the April oil plunge BetaPro Crude Oil Inverse Leveraged Daily Bear ETF (HOD) paid off – especially if they sold it shortly thereafter.

Our sixth-space spot goes to another fund in the first series, the Emerge ARK Fintech Innovation ETF (EAFT), comparable to ARKF, doesn’t hold Tesla but made a winning bet on Square (SQ) as payment and e-commerce infrastructures become more publicly accessible and grow rapidly.

If you want a passive approach to investing in new technologies, you might want to consider Horizons Big Data & Hardware ETF (HBGD) for an index-based bet on big data at a low fee. For an even lower fee index-tracker that’s focused on the red-hot automotive segment of the innovation space, it’s worth looking into the eighth-place Evolve Automobile Innovation ETF Unhedged (CARS.B).

The last of the ARK-inspired ETFs is Emerge ARK Autonomous Technology & Robotics ETF (EAUT), comparable to ARKQ. As you can imagine, it has a large Tesla holding at the end of September, along with peripherals and industries that support automation.

And finally, it turns out that we’re playing video games so much that we’ve been able to create an ETF out of it. Companies in Evolve E-Gaming ETF (HERO) are benefitting from trends such as the rise of eSports and microtransactions in smartphone apps – and likely from additional free time over the holidays.

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About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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