2008 was a tumultuous year for the financial services industry, and an interesting one for investors in exchange-traded funds. Which European ETFs and ETCs were the big winners in 2008? Which funds dominate the European market by size, and which have seen the biggest change in assets under management (AUM) during 2008? In this week's feature, we review the key European ETF facts and figures from 2008.

Top And Bottom Performers

The place to start is with an examination of the top 10 and bottom 10 European ETF performers. To make this more interesting, we've included rankings both including and excluding leveraged and inverse funds, which can dominate returns. In addition, all returns have been taken from the IndexUniverse.eu database of NAV returns and restated in euro terms, adjusting for any movements between the ETF's base currency (in which the NAV is typically stated) and the euro. For the sake of completeness, I've also included the base currency returns, so that users operating in other currencies can adjust the returns on their own.

Top 10 European ETF Performers In 2008 (including leveraged/inverse funds)

Top 10 European ETF Performers In 2008 (excluding leveraged/inverse funds)

The table-toppers for the year are dominated by inverse equity ETFs, with SGAM's two leveraged inverse ETFs (tracking the DJ EuroStoxx 50 and CAC 40 indices) heading the list, with returns of 94% and 83%, respectively. Three government bond ETFs and db x-trackers' short iTraxx Crossover credit ETF also make it into the top 10.

Incidentally, the difference between the SGAM ETF Bear DJ EuroStoxx 50 return for the year (47%) and the 59% return on the db x-trackers Short DJ EuroStoxx 50 ETF is due to the fact that SGAM operates a variable leverage policy of between -50% and -100%, rather than a strict daily rebalancing policy to match minus 100% of the underlying index. Both ETFs gave a return higher than -1 times the DJ Euro Stoxx 50 index 2008 return (which was -44.28%), by the way. It is always worth checking prospectuses to be absolutely sure how inverse and leveraged funds operate, as the mathematics of compounding can throw up significant divergences between ETFs' returns and a simple multiple of the index return, particularly when calculated over longer periods.

When leveraged and inverse funds are excluded, the table is completely dominated by government bond ETFs, with two XMTCH funds on the Swiss bond index topping the list (helped by the strength of the Swiss currency). The other ETFs are predominantly invested in medium-to-long-maturity sovereign issues—the best-performing area of the bond markets last year, as reviewed in last week's feature.

The list of ETF decliners is a lot longer than that of the gainers—at my count, only 61 of the 473 funds in existence for the whole of 2008 made it into positive territory.

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