Tickers in this Article: URA, TAN, GEX, VNM, GAZ, INXX, HAO
With little real market news to talk about, December is often a month for totaling up the scores for the year and reviewing the winners and losers. While others have talked about the best-performing stocks and funds of the year, as well as discussing the goings-on in a host of industries, it's also worth taking notice of whose performance was simply not up to scratch. While the underperformance of most ETFs is simply a reflection of what's going on in the industry or index they mirror rather than the failings of a misguided manager, that's cold comfort for investors who held these funds for a large part of the year.

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Resources Take a Pounding
Although few commentators are calling this the end of the commodity supercycle, the reality is that 2011 was a terrible year for many commodity-focused ETFs. Only one major fund did worse than the Global X Uranium ETF (NYSE:URA), which fell almost 60% amongst fears that the nuclear plant disaster that followed Japan's earthquake and tsunami early in 2011 have ended the expansion of nuclear power for the foreseeable future. (For related reading, see Using ETFs To Build A Cost-Effective Portfolio.)

It wasn't just nuclear-themed resources that took a plunge. In what may qualify as irony, funds focused on natural gas (iPath Dow Jones - UBS Natural Gas ETN (NYSE:GAZ) and United States Natural Gas Fund (NYSE:UNG) and coal (Market Vectors Coal (NYSE:KOL)) were also weak. Never mind the fact that coal and gas are the common alternatives to nuclear power for electrical generation, all of these commodities slid this year. While coal was weaker as utilities cut back due to environmental worries and cheaper natural gas, natural gas was weaker largely on the increasing supply from shale gas producers and the sluggish economic recovery.

These weren't the only commodity losers, though. Funds focused on rare earth metals, lithium, copper and steel were all weak as well.

It Wasn't Easy (or Profitable) Being Green
Even while the resources that underpin conventional (dirty) power generation were enfeebled in 2011, green energy did no better. Solar stocks were decimated by a flood of panels on the market and sharp curtailments of government-subsidized installations in Europe. The Guggenheim Solar ETF (NYSE:TAN) was the worst-performing ETF of notable size in 2011 (down almost 65%), the Powershares Wilderhill Clean Energy (NYSE:PBW) fund dropped 52% and the Market Vectors Global Alternative Energy ETF (NYSE:GEX) wasn't far behind with a 46% loss.

Emerging Markets Thumped
Last and perhaps least, emerging market funds saw significant erosion this year as well. The Emerging Global Shares INDXX India Infrastructure Index Fund (Nasdaq:INXX) was the worst (down more than 40%), but Market Vectors Vietnam (NYSE:VNM), Wisdomtree India Earnings Fund (NYSE:EPI), and Guggenheim China Small Cap ETF (NYSE:HAO) were all quite weak as well.

The Bottom Line
Will 2011's losers be 2012's winners? For the long term, it's tempting to argue that the emerging market funds may well be good buys, as the demographic and economic arguments are pretty compelling. Likewise, many of the commodity funds could prove to be good recovery plays if the global economy can show a little more life in 2012, though betting on a recovery in uranium seems risky. (For related reading on emerging markets, see What Is An Emerging Market Economy?)

The green energy funds are a tougher case. Though it's hard to argue that green energy isn't here to stay and that solar and wind both have a bright future as power sources, there is still likely to be a further shakeout in the space. Risk-tolerant investors may feel that the 50%+ price drops this year de-risk the stories, but these companies are going to have to learn how to navigate a new market environment where sovereign governments cannot afford such direct support.

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At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

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