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Top Performing Utility ETFs This Year

Sweta Jaiswal, FRM

The year 2019 has been quite promising for the utility sector. In fact, the S&P 500 Utilities (Sector) index has gained 18.4% year to date. The utility sector is among the most stable sectors for the long term as its players are likely to offer decent returns. It is known for its non-cyclical nature and often acts as a safe haven during erratic market conditions (read: Sensing a September Slump? Buy These 6 ETFs).

What’s Driving the Upside?

Escalating trade war tensions between the United States and China have been making edgy investors seek defensive options.  Retaliating to President Trump’s early August attack, China imposed new tariffs of 5% to 10% on $75 billion worth of U.S. goods, effective on some items from Sep 1 and others from Dec 15. The raised duties will be levied on nearly 5,078 U.S. products, including agricultural goods like soybeans and coffee along with whiskey, seafood, aircraft and crude oil. Trump responded by raising tariffs on $550 billion worth of Chinese goods. He lifted existing tariffsto 30% from 25% on $250 billion of Chinese imports effective Oct 1.  Moreover, tariffs planned on a further $300 billion in Chinese goods will be revised to 15% from 10% in two stages — Sep 1 and Dec 15 (read: 4 Dividend ETFs to Ride Out Trade War Uncertainty).

As a result, per the Chinese Commerce Ministry, China recently filed a complaint against the United States at the World Trade Organization (WTO) over U.S. import duties. Interestingly, this is the third tariff case China has filed against the United States to challenge China-related tariffs at the WTO.

Moreover, the U.S. central bank has enacted its first rate cut since 2008 in July 2019. This is likely to lower bond yields going forward and favor utilities ETFs. Also, there are talks that the Fed may cut rates in September. This is a great scenario for utilities ETFs as these perform better in a low-rate environment.

Utility ETFs Up 20% or More

The trends have been benefiting utility ETFs. Here we highlight certain ETFs that have gained more than 20% year to date:

Virtus Reaves Utilities ETF UTES — up 22.5% year to date

This actively-managed fund tries to deliver total return through a combination of capital appreciation and income, primarily through investments in equity securities of companies in the utility sector. It comprises a basket of 26 holdings. The fund has an AUM of $24.7 million and expense ratio of 0.49%.

The Utilities Select Sector SPDR Fund XLU — up 21%

The fund tracks the Utilities Select Sector Index. It comprises a basket of 28 holdings. The fund has an AUM of $11.32 billion and expense ratio of 0.13% (read: 5 Sector ETFs Surviving August Turmoil).

Vanguard Utilities ETF VPU — up 20.6%

The fund tracks the MSCI US Investable Market Utilities 25/50 Index and includes stocks of companies that distribute electricity, water, or gas, or that operate as independent power producers. It comprises of a basket of 69 holdings. The fund has an AUM of $4.20 billion and expense ratio of 0.10%  (read: Selloff or Not, Utilities ETFs Should Stand Tall).

Fidelity MSCI Utilities Index ETF FUTY — up 20.6%

This fund provides exposure to 68 utilities stocks with AUM of $830.2 million. This is done by tracking the MSCI USA IMI Utilities Index. The ETF has 0.08% in expense ratio.

John Hancock Multi-Factor Utilities ETF JHMU — up 20.2%

The fund tracks the John Hancock Dimensional Utilities Index which is a rules-based index of U.S. utility stocks that have been selected based on sources of expected returns. It holds 43 stocks in its basket and has 0.40% in expense ratio. It has accumulated $50.3 million in its asset base.

iShares U.S. Utilities ETF IDU — up 20.1%

This ETF tracks the Dow Jones U.S. Utilities Index. It holds 48 stocks in its basket and has 0.43% in expense ratio. It has accumulated $930.5 million in its asset base (read: Mixed Q2 Earnings Results Put Utility ETFs in Focus).

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Virtus Reaves Utilities ETF (UTES): ETF Research Reports
 
Fidelity MSCI Utilities Index ETF (FUTY): ETF Research Reports
 
Utilities Select Sector SPDR Fund (XLU): ETF Research Reports
 
Vanguard Utilities ETF (VPU): ETF Research Reports
 
iShares U.S. Utilities ETF (IDU): ETF Research Reports
 
John Hancock Multifactor Utilities ETF (JHMU): ETF Research Reports
 
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