Investors are being warned to avoid a specific exchange-traded fund with a 28% year-to-date decline, elevated tracking error, and concentrated exposure to overleveraged sectors. The fund's recent performance and structural risks make it particularly unsuitable for year-end portfolio additions.
- The ETF has declined 28% year-to-date, compared to a 12% gain in the S&P 500 over the same period.
- Its tracking error exceeds 4.5%, indicating substantial deviation from the benchmark index.
- More than 60% of the fund’s assets are allocated to companies with credit ratings below investment grade.
- The fund’s average daily trading volume has dropped 35% over the past quarter, raising liquidity concerns.
- Its expense ratio of 1.85% is above the sector average, amplifying underperformance.
- The fund’s correlation to high-volatility indices has risen to 0.82 in the past 90 days.
A particular ETF has emerged as a red flag for investors considering portfolio moves in December, driven by deteriorating risk metrics and a sharp performance drop. The fund, which tracks a niche segment of speculative equities, has posted a 28% loss year-to-date as of late November, significantly underperforming broader market indices. Its underlying holdings are heavily weighted toward companies with declining revenue growth and elevated debt-to-equity ratios, with over 60% of the portfolio in firms with credit ratings below investment grade.