Small Energy ETF Offers Big Returns

ETF Trends

As the second-best performing sector in the S&P 500 this year, the energy group has made winners of plenty of exchange traded funds.

The Energy Select Sector SPDR (XLE) , the largest equity-based energy ETF by assets, has attracted nearly $3.2 billion in new assets this year, more than any other sector ETF. In just the second quarter, XLE has pulled in almost $2.3 billion in new assets. [Energy ETFs Dominate Sector Flows]

More important than the superlatives of inflows are the returns offered by an array of energy funds. Of the top-25 non-leveraged ETFs over the past three months, 13 are either equity-based energy funds or ETFs focusing on master limited partnerships. [Soaring Demand for Energy ETFs]

Often times in scenarios like this, a couple of ETFs end up flying under the radar. Such is life for the iShares MSCI Global Energy Producers ETF (FILL) . FILL, which is tiny with just $5.7 million in assets under management, is up 12% this year.

FILL debuted in early 2012 as part of a five-ETF suite of specialized, equity-based commodities funds. The ETF tracks the MSCI ACWI Select Energy Producers Investable Market Index, giving it exposure to nearly 230 global energy producers, including a 49.5% weight to the U.S.

FILL can either be viewed as a competitor or an alternative to the iShares Global Energy ETF (IXC) and, to a lesser extent, the SPDR S&P International Energy Sector ETF (IPW) though IPW has no exposure to U.S. companies.

FILL’s U.S. exposure is 720 basis points below that of IXC. The former features a combined 6.6% weight to China, Russia and Brazil, meaning its emerging markets exposure is double that of IXC’s.

Although slight, FILL does have some exposure to Russian energy firms, a potential advantage given the deep discounts at which those companies currently trade and the expect dividend growth those firms are forecast to deliver in the years ahead. [Russia ETFs Hold Some Cheap Stocks]

FILL’s top-10 holdings are standard fare among global energy ETFs that feature U.S. exposure, including a 22.2% combined weight to Dow components Exxon Mobil (XOM) and Chevron (CVX). Royal Dutch Shell (RDS-A), BP (BP) and Total (TOT) combine for nearly 19% of the ETF’s weight. FILL sports a trailing 12-month yield of 2.3% and an annual expense ratio of 0.39%.

iShares MSCI Global Energy Producers ETF

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ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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