Utility ETFs Have Varying Voltage

February 20, 2020

[This article appears in our March 2020 issue of ETF Report.]

Utilities have always been viewed as a safe harbor type of investment, a boring and uneventful place to put your money. While the category trailed the S&P 500 during 2019 in terms of performance, it still did better than other sectors, like energy.

There are currently seven ETFs with more than $100 million in assets under management (AUM) each that cover utilities. While four of the funds have many similarities (plain vanilla and cap-weighted), the three remaining funds have significant differences due to their varied smart beta methodologies.

Cap-Weighted Choices
The largest fund in the space is the Utilities Select Sector SPDR Fund (XLU), with $11.7 billion in AUM, followed by the Vanguard Utilities ETF (VPU), with $4.7 billion. Interestingly, those two funds are the most narrow and broadest ETFs, respectively, in this survey. XLU has 29 holdings, while VPU has 69.


For a larger view, please click on the image above.


The iShares U.S. Utilities ETF (IDU) and the Fidelity MSCI Utilities Index ETF (FUTY) are the other two cap-weighted ETFs in the space, with roughly $1 billion in AUM apiece. While FUTY has 65 holdings, IDU has 48.

The most expensive of the four vanilla ETFs is IDU, which charges a rather stunning 0.43%, while FUTY is the cheapest, at 0.08%. XLU, the largest of the ETFs, charges 0.13%. Meanwhile, VPU charges 0.10%.

There’s not a lot to distinguish these funds from each other. In fact, three of the four have the same holdings in their top 10 components, while one fund, VPU, has nine of its top 10 components in common with the other three ETFs.


For a larger view, please click on the image above.


XLU has the deepest liquidity, with an average of $886 million in value traded daily, with the narrowest spread in the group, at 0.02%. However, the other three ETFs have spreads of 0.03%, and even the cap-weighted fund with the lowest volume trades an average of $6 million daily.

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