Slideshow Which passive funds have best 10-year returns?

Published
  • November 01 2017, 3:35pm EDT
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Passively managed funds have changed the face of the markets since their introduction. Indeed, they’ve fueled the growth of the two largest asset managers in the world by assets (Vanguard and BlackRock). The convenience and inexpensive access to the markets are hard to beat.

The debate that rages is whether they offer the same potential upside to investors as actively managed funds. An S&P 500 ETF usually will pale in comparison to the best active funds in any given year. But over time, they tend to catch up, unless of course clients are lucky enough to reallocate every year to buy the active funds that will become one of the best over the next 12 months. In other words, unless they continually beat the markets, which is like winning the World Series year after year after year.

Eventually, winning streaks or investment strategies break down. So we’ve collected the best passive funds (with a minimum of $500 million in assets) based on 10-year returns. These funds, similar to our list of active funds last week, are heavily invested in tech and health care.

The average annual return was 12.6%. The S&P 500 posted a 7.6% annual gain in that period, as measured by SPY, the biggest S&P 500 ETF. Over three years, the average return of these 20 funds was 13.1%; for SPY, it was 11.6%.

In addition to 10-year and three-year return, we also show expense ratios, which averaged 42 basis points, slightly less than half the average expense ratio of our active funds list last week.

Scroll through to see all 20 of the best-performing passive funds over 10 years. All data from Morningstar Direct.

20. Guggenheim S&P 500 Pure Growth ETF (RPG)

3-Yr. Return: 11.18%
10-Yr. Return: 10.86%
Expense Ratio: 0.35%
Total Assets (millions): $2,205

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19. Health Care Select Sector SPDR ETF (XLV)

3-Yr. Return: 10.81%
10-Yr. Return: 11.06%
Expense Ratio: 0.14%
Total Assets (millions): $17,862

18. USAA NASDAQ-100 Index (USNQX)

3-Yr. Return: 15.53%
10-Yr. Return: 11.06%
Expense Ratio: 0.53%
Total Assets (millions): $1,514

17. First Trust US Equity Opportunities ETF (FPX)

3-Yr. Return: 11.94%
10-Yr. Return: 11.07%
Expense Ratio: 0.60%
Total Assets (millions): $887

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16. iShares US Healthcare ETF (IYH)

3-Yr. Return: 10.65%
10-Yr. Return: 11.10%
Expense Ratio: 0.44%
Total Assets (millions): $2,205

15. Consumer Discret Sel Sect SPDR ETF (XLY)

3-Yr. Return: 12.64%
10-Yr. Return: 11.26%
Expense Ratio: 0.14%
Total Assets (millions): $11,458

14. Vanguard Health Care ETF (VHT)

3-Yr. Return: 11.23%
10-Yr. Return: 11.47%
Expense Ratio: 0.10%
Total Assets (millions): $8,004

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13. iShares US Aerospace & Defense ETF (ITA)

3-Yr. Return: 21.01%
10-Yr. Return: 11.51%
Expense Ratio: 0.44%
Total Assets (millions): $4,565

12. iShares North American Tech-Software ETF (IGV)

3-Yr. Return: 22.01%
10-Yr. Return: 11.53%
Expense Ratio: 0.48%
Total Assets (millions): $1,097

11. PowerShares QQQ ETF (QQQ)

3-Yr. Return: 15.94%
10-Yr. Return: 11.58%
Expense Ratio: 0.20%
Total Assets (millions): $52,348

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10. iShares US Medical Devices ETF (IHI)

3-Yr. Return: 19.78%
10-Yr. Return: 11.59%
Expense Ratio: 0.44%
Total Assets (millions): $1,426

9. First Trust NASDAQ-100-Tech Sector ETF (QTEC)

3-Yr. Return: 23.28%
10-Yr. Return: 12.28%
Expense Ratio: 0.60%
Total Assets (millions): $2,200

8. Guggenheim S&P 500 Eq Weight HC ETF (RYH)

3-Yr. Return: 11.37%
10-Yr. Return: 12.74%
Expense Ratio: 0.40%
Total Assets (millions): $663

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7. iShares US Pharmaceuticals ETF (IHE)

3-Yr. Return: 5.09%
10-Yr. Return: 12.87%
Expense Ratio: 0.44%
Total Assets (millions): $621

6. First Trust Health Care AlphaDEX ETF (FXH)

3-Yr. Return: 6.54%
10-Yr. Return: 12.93%
Expense Ratio: 0.62%
Total Assets (millions): $1,042

5. First Trust Dow Jones Internet ETF (FDN)

3-Yr. Return: 20.88%
10-Yr. Return: 14.19%
Expense Ratio: 0.54%
Total Assets (millions): $4,935

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4. iShares Nasdaq Biotechnology ETF (IBB)

3-Yr. Return: 5.09%
10-Yr. Return: 14.50%
Expense Ratio: 0.47%
Total Assets (millions): $9,961

3. PowerShares Dynamic Pharmaceuticals ETF (PJP)

3-Yr. Return: 3.33%
10-Yr. Return: 15.03%
Expense Ratio: 0.56%
Total Assets (millions): $700

2. SPDR S&P Biotech ETF (XBI)

3-Yr. Return: 15.78%
10-Yr. Return: 16.03%
Expense Ratio: 0.35%
Total Assets (millions): $4,022

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1. First Trust NYSE Arca Biotech ETF (FBT)

3-Yr. Return: 9.35%
10-Yr. Return: 17.03%
Expense Ratio: 0.56%
Total Assets (millions): $1,215