If you were holding inverse exchange-traded funds of almost any sort during the past quarter, odds are your portfolio got a big boost.

All of the top 15 finishers in the third quarter that ended Tuesday were ETFs (and exchange-traded notes) focused on taking short positions. Whether it was tech, commodities or even utilities, inverse funds' total returns defied those of broader-based, long-only funds.

At the top was the ProShares UltraShort Basic Materials (AMEX: SMN) ETF. It gained more than 84% in the third quarter. The runner-up was the ELEMENTS Australian Dollar ETN (NYSEArca: ADE), which was up 87%-plus and was the only non-inverse fund in the group. (See complete list below.)

But other than traders and sophisticated investors trying to hedge their long investments in torrid conditions, short-focused ETFs probably hold limited appeal to long-term-oriented individuals. The third quarter didn't completely shut those types of investors out, however.

Although long-only investors didn't find as giddy of returns with more staid fare, several areas of the market did produce positive results. Those included:

• In large-cap growth, four ETFs investing primarily in health care managed to earn positive total returns in the quarter. In fact, the Biotech HOLDRs (AMEX: BBH) wound up gaining 8.21%. Software and Consumer Services also outperformed the broader markets.
• Financials didn't just bounce back, they roared back. The Regional Bank HOLDRs (AMEX: RKH) notched a nifty 18.98% gain and the iShares Financial Services (NYSEArca: IYG) made 7.97% in the quarter. Perhaps more than any other sector, though, Financials were a boom-and-bust story. The last two weeks were crucial. In fact, in the last two days of September, even the most diversified large-cap value ETFs saw their three-month returns drop nearly 50% only to jump back up on the last day of the month.
• Consumer staples were especially strong for large-cap blend ETFs. And rather wide gaps showed up in funds following the same indexes and within the same styles. Most notably, SPDRs Trust (AMEX: SPY) underperformed its S&P 500-tracking iShares rival.
• In small-caps, it was a tale of contrasting styles. Financials rebounded even more strongly in these segments of the market, leading specialty ETFs such as SPDR KBW Regional Bank (AMEX: KRE) to a 33%-plus return in the quarter. Funds tracking small-cap-oriented indexes targeting on homebuilders also scored double-digit gains. But even broader-based small-cap value funds such as the WisdomTree SmallCap Dividend ETF (NYSEAarca: DES) wound up with a better-than 10% return.

The late push by Financials and value-related stocks boosted the fortunes of ETF providers such as WisdomTree and PowerShares with their FTSE RAFI-based funds. In especially volatile times, paying attention to dividends and other fundamental valuations helped to lift those portfolios to top finishes across market-cap sizes. Several equal-weighted funds also finished relatively strong.

For a breakdown of top performers in the quarter by Morningstar's nine distinct asset classes and styles, see the lists at the end of this article for Q3 total returns based on the Chicago-based investment researcher's database.

But first, a short recap of the most liquid and closely followed categories might be in order; that is, large-cap ETFs in the three different styles—value, blend and growth.

As investors prepare for a final three-month push to raise dour 2008 returns, third-quarter trends point to continued volatility across markets, at least in the near term.

But much hinges on a $700-billion-bailout package for some of the world's biggest banks and financial services firms. And even if that passes both chambers of Congress, economists aren't expecting the ongoing global credit crisis to end right away.

The performance of the most liquid blue-chip stocks in the U.S. under such choppy waters is likely to undergo increased scrutiny. Perhaps the most transparent way to monitor the large-cap universe as a group is through exchange-traded funds.

Given this unique investing environment, following is a Q3 review of that category:

Large Value

After a rough start to the year as the credit crisis pummeled mainstays in this group, (i.e., Financials), value staged its first sustained comeback since last summer. But look a little closer—this is a definite case of "what you see isn't always what you get."

A prime example was the $11 billion-plus Vanguard Value ETF (NYSEArca: VTV). It's a traditional passive market-cap-sized fund that tracks the MSCI U.S. Prime Market 750 Index. VTV has more mid-cap names than the iShares S&P 500 Value Index (NYSEArca: IVE). But going smaller didn't pay off as in the past during this Q3. Mid-cap value funds on the whole fell along the same lines or more—witness the iShares S&P MidCap 400 Value Index (NYSEArca: IJJ) and its 6.55% loss in the quarter. Another well-diversified and widely used mid-cap value fund, the Vanguard Mid-Cap Value ETF (NYSEArca: VOE) also ended with more than a 7.71% drop.

It shouldn't be a surprise, then, that WisdomTree LargeCap Dividend (NYSEArca: DLN) had a bang-up quarter. It had an average market cap nearly 50% greater than IVE. With the increasing volatility and cloud moving back over financials as political bailouts and big-name bank takeovers moved into the headlines to end Q3, a higher dividend yield helped steady this ETF's returns appreciably.

Large Blend

Interestingly enough, SPY—the most heavily traded and elder statesmen of S&P 500 index-tracking ETFs—was a relative underperformer in the category. In fact, the rival iShares S&P 500 Index (NYSEArca: IVV) lost more than a full percentage point less in the quarter—even though both follow the exact same benchmark.

In a quarter as turbulent as what just passed, though, one key stat in this widely held category might be average daily volume. In the past three months, IVV's been around 4.4 million shares, while SPY's averaged around 305.3 million.

In theory, that should work on its behalf. But with credit markets freezing and several large-cap ETFs showing gaps between underlying prices and net asset values in the quarter, a level playing field was lost at times.

"In normal times, SPY's greater liquidity should help. But the third quarter was anything but ordinary," said Joe Clark, managing partner at Financial Enhancement Group LLC.

Still, he notes that as the first ETF, SPY was set up with a bit different structure than most others that came later, such as IVV. That might be a cause of greater tracking error with the wild swings seen in markets of late, although Clark says that over time SPY should do well in tracking the S&P 500.

"We've seen things happen in the third quarter that defy reasonable explanation," Clark said.

Another performance blip showed up between total market ETFs. In the quarter, the iShares Russell 3000 Index (NYSEArca: IWV) outperformed, with a 7.31% total return. But that was 1.61 percentage points better than the Vanguard Total Stock Market ETF (NYSEArca: VTI), which fell 8.94%.

That was significant for such a relatively short three-month period. But unlike with SPY and IVV, these two ETFs follow different benchmarks—VTI uses a so-called "second generation" index with buffer zones and the like developed by MSCI. The IWV goes with a more standard Russell 3000 Index.

Each holds about the same number of stocks in remarkably similar allocations by cap size. So why the big advantage for IWV? Although slight, VTI had a bit more in the hard-hit Energy sector and slightly less in Financials and Health care.

It's important to note that those sector weightings aren't large enough to expect major differences between these ETFs in the longer term. More significant is likely to be IWV's expense ratio (0.20%) compared with VTI's (0.07%). How long that will take to make a dent is still in question, however. In the past five years, total returns for the two are within 0.02 percentage points of one another—with VTI on the losing end.

Also, the Rydex S&P Equal Weight (AMEX: RSP) ETF didn't swoon despite its better-than 45% weighting in mid-caps heading into September. This fund also stuck to its underlying S&P benchmark, meaning stock-picking wasn't at play here. But consider that RSP's top 10 holdings represented around 3% of its assets. Meanwhile, IVV's top 10 comprised nearly 20% of total assets.

Even though both were highly diversified, spreading the risks (RSP's largest name had 0.51%; most others were half that level), definitely paid off for the equal-weighted portfolio in the third quarter.

Large Growth

Seems like old times. After all of the talk about large-cap growth's resurgence over the past two years, many ETF momentum investors were rewarded in 2007. But that outperformance reversed in the second quarter and continued to lag other large-cap styles in the last quarter.

With their big wins in 2007, some of the most popular funds still remain neck and neck with their large-cap value competitors over the last year. One is the iShares Russell 1000 Growth Index (NYSEArca: IWF). It's down nearly 20.5% in the past 12 months vs. large-cap-value-focused IVE's 24.4% fall.

Another data point to keep in mind is that IWF's returns slipped more than 12.5% in the second quarter. So even though it slid more in the third quarter, IWF's fall was less severe.

Top 15 Returns For ETFs & ETNs In Third Quarter 2008

Top 10: Large-Cap Growth (Return %)

Top 10: Large-Cap Value (Return %)

Top 10: Large-Cap Blend (Return %)

Top 10: Small-Cap Growth (Return %)

Top 10: Small-Cap Value (Return %)

Top 10: Small-Cap Blend (Return %)