Worst-Performing ETFs of First Quarter

iPath S&P 500 VIX Short-Term Futures Index, down 38.3%, tops the list of poor performers.
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NEW YORK (TheStreet) -- iPath S&P 500 VIX Short-Term Futures Index (VXX) - Get Report -38.3%

The results are in and the ETF taking the distinguished position of the worst performing fund for the first quarter of 2010 is VXX.

VXX was created when market volatility was nearing a peak back in March of 2009. Since then, as markets have improved, it has been on an almost unbroken downward slide, with the first quarter of 2010 being no exception.

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To add insult to injury, the ETF will disappoint investors even further, since it is having issues with contango and has not been able to accurately track its underlying index.

The future for VXX does not look bright either, as the

SEC is considering a change to the regulations for ETFs that trade derivatives

.

iPath Dow Jones-UBS Sugar Total Return Subindex ETN

(SGG) - Get Report

-36.4%

Sugar prices have seen a spectacular fall, dropping nearly 50% since reaching a 29-year high at the start of February. The commodity's price crash can be attributed to ideal growing conditions brought on by the weakening El-Nino weather pattern.

This cyclical phenomenon had wreaked havoc on top sugar-producing nations. Heavy rains and flooding had plagued crops in Brazil, while drought had struck crops in India. However, since the weather pattern began dissipating, yield forecasts are up and this threatens to further bury SGG in the second quarter.

U.S. Natural Gas

(UNG) - Get Report

-31.5%

There's not much to say for a fund for which so much has already been said. Abundant natural gas supplies have held prices low and hopeful investors were crushed once again by reality. UNG saw new all-time lows in the quarter and while it will certainly be the case at some point, there is no sign on the horizon that suggests the string of new lows will be broken in the second quarter.

iPath Dow Jones-UBS Grains Total Return Subindex ETN

(JJG) - Get Report

-16.8%

The first quarter of 2010 has not been kind to investors with exposure to the grain industry. Throughout the first three months of the year, the prices of corn, soybeans and wheat have gotten pounded with farmers and analysts predicting record-breaking output. Unfortunately for investors holding the iPath Dow Jones-UBS Grains Total Return Subindex ETN, these are the three crops that make up the fund's entire index.

Claymore/MAC Global Solar Energy

(TAN) - Get Report

-16.5%

TAN dropped below its long-term support level around $8 per share in the first quarter, and for a while it looked as though the bottom might drop out completely on the fund. However, it closed the quarter at $8.56 a share, as shares rebounded from their lows.

First Solar

(FSLR) - Get Report

, a large component of TAN, was recently upgraded to "overweight" by Morgan Stanley, which helped boost the ETF, but this gain may be fleeting, because there are still headwinds pushing against this sector, especially due to sovereign debt. European countries that are grappling with their debt problems or preparing to bail out their neighbors are not going to be keen to reinstate or extend government subsidies for solar projects.

iShares MSCI Spain Index

(EWP) - Get Report

-12.1%

The euro and the nations using that currency have been dragged down by association with Greece in the past few months, but among the country-specific Europe ETFs, none has been hit harder than EWP.

Concerns about Greece have drawn attention to the weaknesses in other euro-zone countries, and Spain is full of problems. High unemployment, a struggling real estate industry and a financial sector with significant exposure to bad real estate have all led to speculation that the country may be the next and largest problem to emerge from the European continent.

A rescue plan for Greece from the IMF does not necessarily fix Spain's problems either, so weakness in this country may persist even after the Greeks mend their fiscal problems.

First Trust Global ISE Wind Energy Index Fund

(FAN) - Get Report

-11.5%

While solar-energy companies caught a lot of flak, it was not the only alternative energy industry to take a beating in the first quarter of 2010. Wind-energy companies also felt the heat during this period as leading wind-energy-producing nations focused on tightening their financial belts.

As with TAN, investors should be cautious of FAN going forward.

Market Vectors Brazil Small Cap

(BRF) - Get Report

-7.5%

Brazil was particularly hard hit by fears over Chinese monetary tightening. BRF, along with

iShares MSCI Brazil

(EWZ) - Get Report

, sank more than 15% by early February before rebounding. BRF followed EWZ higher until early March, when the two funds began to deviate; EWZ is almost back to where it started the year. BRF is still outperforming EWZ over longer time frames, though. Over the past six months, BRF still maintains about a 5% advantage over EWZ's 11.5% six-month return.

iShares MSCI Italy Index Fund

(EWI) - Get Report

-6.5%

Italy, a normally sunny Mediterranean destination like Greece and Spain, turned cloudy for investors in the first quarter of 2010.

As was the case for Spain, the problems in Greece drew attention to other troubled spots within the euro zone, and negative sentiment began to sink in. This was furthered along by reports of local Italian governments losing large amounts of money after dabbling in complicated derivatives trades.

The situation in Italy, like the one in Spain, is something that ETF investors should keep an eye on. Problems in the tiny Greek economy were enough to throw off markets worldwide for a period of time, and the Italian and Spanish economies are both much larger. Continued downward movement in EWI could be an indicator of a rough patch for markets everywhere.

CurrencyShares British Pound Sterling Trust

(FXB) - Get Report

-6.1%

Worries about British exposure to Greek debt weighed on the pound in the first quarter, while concerns about Britain's own debt and the intricacies associated with weaning the economy from stimulus put further downward pressure on the pound.

Additionally, preliminary reports predicted that the general elections coming up this spring may result in a gridlocked parliament, which would hamper a push for an effective and timely fiscal stratagem.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion was long EWZ.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.