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In an interesting summer for investors attempting to navigate inflation, shifting interest-rate forecasts, turbulence in parts of the AI space, and other challenges, wins can be found in some unexpected places. Exchange-traded funds (ETFs) remain vastly popular, so it's no surprise that some of them have done quite well in recent weeks. However, the fact that strong returns can be found in funds tied to commodities, Chinese equities, and cash-generating growth names may be surprising.

The three funds below are quite different in many ways, but each supports the idea that theme-driven funds may outpace broad market funds under the right conditions. Notably, these funds also underscore the importance of tactical bets in the ETF space and the value of expanding beyond the Magnificent Seven.

HGER: An Aggressive Commodity Play Leaning Into Inflation

The Harbor Commodity All-Weather Strategy ETF (NYSE: HGER) is specifically designed to handle inflationary periods thanks to its focus on commodities. Specifically, the fund holds futures of liquid commodities that typically have high expected inflation sensitivity. The portfolio has done well this summer as inflation has remained stubborn, as it leans into its inflation-sensitive positions during periods of higher inflation.

Unsurprisingly, given the geopolitical landscape this summer, some of the largest positions in HGER's basket are in petroleum product futures and gold. Grains and soybeans, soft commodities, and industrial metals are all featured prominently as well.

HGER boosts its strong performance—about 6% in the last month and 35% year to date (YTD)—with a hearty dividend yield of 5.2%. While commodities are often seen as a defensive play during inflationary periods or amid global supply shocks, the fund actually takes a fairly aggressive approach that has paid off—and investors may be inclined to see this strategy continuing so long as external factors remain consistent heading into the fall. If so, the fund's fairly high 0.68% expense ratio may be easy to excuse.

Bright Spots in the Chinese Equities Space Has Fueled MCHI's Gains

Years of weak sentiment toward Chinese stocks due to uneven domestic consumption may be giving way, thanks in large part to a technology-driven rally. Broad government support, in particular for the property sector, has helped to improve capital markets and drive other areas of growth, although much work remains to be done.

The iShares MSCI China ETF (NASDAQ: MCHI) has proven itself to be a worthwhile consideration for investors bullish on Chinese equities as this optimistic perspective has begun to emerge.

It helps that the fund is heavily invested in a couple of major tech names such as Tencent Music Entertainment (NYSE: TME) and Alibaba (NYSE: BABA). These and other tech giants are seeing improved profitability that has helped to drive about 8% growth for MCHI since late June.

Risks remain, and MCHI's specialized focus on individual names (it holds close to 600 individual stocks) may make it appeal primarily to investors with a longer time horizon who are willing to tolerate some volatility in the near-term. Its 0.59% expense ratio puts some pressure on the fund, as it needs to generate steady returns to justify its cost.

VFLO's Portfolio Includes Growth Winners With Free Cash Flow to Spare

Free cash flow is essential not only for operational success and growth potential, but also for returning value to shareholders with dividends or buybacks. The VictoryShares Free Cash Flow ETF (NASDAQ: VFLO) holds a basket of large-cap U.S. stocks rated based on quality, growth potential, and free cash flow (both trailing and anticipated).

With interest rates staying high, it is prohibitively expensive for some companies to service debt. At the same time, a rush to spend on AI buildouts has left many firms cash-depleted. Companies with strong potential to generate cash flow have a natural advantage in this environment.

VFLO's one-month returns of 13% affirm the success of this approach given current conditions. Zooming out to look at year-to-date (YTD) performance, the fund has notable gains of 36%.

Whether the companies comprising VFLO's portfolio are seeing strong price appreciation because of their free cash flow or are winning thanks to their overall growth prospects is perhaps less important for investors than the fact that they are indeed generating impressive results on both fronts.

The fund charges an expense ratio of 0.39%, on the higher side compared to many passively managed ETFs, but potentially worth the cost if VFLO can maintain its performance track record. With about $10 billion in managed assets, it appears that many investors are convinced.

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