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Should You Invest in the Fidelity MSCI Utilities Index ETF (FUTY)?

If you're interested in broad exposure to the Utilities - Broad segment of the equity market, look no further than the Fidelity MSCI Utilities Index ETF (FUTY), a passively managed exchange traded fund launched on 10/21/2013.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $474.23 M, making it one of the larger ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. FUTY seeks to match the performance of the MSCI USA IMI Utilities Index before fees and expenses.

MSCI USA IMI Utilities Index represents the performance of the utilities sector in the U.S. equity market.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 3.07%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 99.70% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE) accounts for about 9.90% of total assets, followed by Duke Energy Corp (DUK) and Dominion Energy Inc (D).

The top 10 holdings account for about 50.19% of total assets under management.

Performance and Risk

The ETF has added roughly 6.92% so far this year and was up about 1.17% in the last one year (as of 11/30/2018). In that past 52-week period, it has traded between $31.11 and $36.77.

The ETF has a beta of 0.16 and standard deviation of 13.29% for the trailing three-year period, making it a medium risk choice in the space. With about 73 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Utilities Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FUTY is a reasonable option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR Fund (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $3.03 B in assets, Utilities Select Sector SPDR Fund has $8.30 B. VPU has an expense ratio of 0.10% and XLU charges 0.13%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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FID-UTILITY (FUTY): ETF Research Reports
 
Dominion Energy Inc. (D) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
SPDR-UTIL SELS (XLU): ETF Research Reports
 
VIPERS-UTIL (VPU): ETF Research Reports
 
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