Interest in overseas equities—which have become more popular as many investors think the U.S. market is overvalued—has led to a surge for currency-hedged equity funds. In the top 20 best-performing ETFs, there are seven currency-hedged portfolios—three German ones, three broad European equity funds and a Japan-hedged health-care fund.
With the U.S. dollar rising against nearly every currency, investors are worried about losing money on foreign investments. By buying hedged products, they can get market returns without worrying about currency ups and downs impacting their portfolio, said Aniket Ullal, First Bridge Data's founder.
"People are wondering how they can stay invested in Germany but not suffer the consequences of a decline in that local currency," he said.
There's no guarantee that what's topping the list so far will lead the pack at the end of the year. Most of the ones in the top 20 are sector-, country- or trend-related—you rarely see a balanced fund on the list.
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These funds do well when a sector or trend is hot, and they do worse when that idea goes out of fashion. If you think biotech will continue to do well, then you could make a bet on the sector. If not, then stay away. There has in the least been some profit-taking from biotech stocks in recent days, if not a bearish call after its big run: the Nasdaq biotech stock index is down near-8 percent in the past five trading sessions, and biotech was the biggest loser among market sectors on the first trading day of the second quarter.
"It's just a question as to whether these sectors and countries continue to rotate through the year or not. Sometimes that rotation is shorter, and sometimes it's longer," Morningstar's Kinnel said. "The most important thing to do is to build a good portfolio and buy low and sell high."