Top ETFs In The Best Performing Sector

Investors have more than a dozen ETFs to choose from to get exposure to 2016's best-performing stock market sector.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

Anyone who’s been paying attention to the stock market knows utilities have been the place to be this year. Most of the indexes tracking U.S. utilities are up more than 20% this year, handily beating the broad market, which is up 6.5% as of July 13.

Low interest rates have been cited as a key reason for utilities' outperformance, along with a general tendency toward safe-haven assets on the part of investors so far in 2016.

16 Total Utility ETFs

As a safe, relatively predictable industry, there aren't many surprises when it comes to utilities, and that goes for utility ETFs as well. Exchange-traded funds tied to the sector are broadly higher, as can be expected, but there isn't much differentiation among the funds compared with what you might see in other sectors.

There are currently 16 utilities-focused ETFs listed in the ETF.com Utilities channel. With the exception of one that is down 35.1%―the ProShares UltraShort Utilities ETF (SDP)―an inverse product―they're all up so far this year.

SDP's counterpart, the ProShares Ultra Utilities ETF (UPW)―a 2x-leveraged product―is the top  performer in the space, with a gain of 45.7%

US-Focused Utilities ETFs

After UPW, there are nine U.S.-focused utilities ETFs all clustered together, with returns of 21% to 24%. Of these nine, four of them offer broad, large-cap-heavy exposure to the sector.

These include the Vanguard Utilities Index Fund (VPU | A-95), the iShares U.S. Utilities ETF (IDU | A-93), the Fidelity MSCI Utilities Index ETF (FUTY | A-94) and the Utilities Select Sector SPDR Fund (XLU | A-89).

Meanwhile, the Guggenheim S&P 500 Equal Weight Utilities ETF (RYU | A-86) and the PowerShares S&P SmallCap Utilities Portfolio (PSCU | A-31) tilt their exposure toward smaller-cap firms. RYU does this by equal-weighting utilities stocks within the S&P 500, while PSCU does this by holding stocks in the S&P Small Cap 600 and market-cap-weighting them.

Another pair of utilities ETFs, the PowerShares DWA Utilities Momentum Portfolio (PUI | B-84) and the First Trust Utilities AlphaDex Fund (FXU | B-82), add their own twist to the sector by weighting their holdings based on fundamental factors. DWA focuses on firms with price momentum, while FXU focuses on value and growth factors.

Incidentally, two new ETFs that launched this year, the John Hancock Multifactor Utilities ETF (JHMU) and the iShares Edge MSCI Multifactor Utilities ETF (UTLF), also focus on factors. JHMU weights its holdings based on size, value, momentum and profitability. UTLF weights them based on size, value, momentum and quality.

Perhaps the most unique utility ETF of the bunch is the Reaves Utilities ETF (UTES | D-79). It's the only actively managed utility ETF fund on the market, and it’s easily kept pace with its passive ETF counterparts despite the largest expense ratio in the segment.

TickerFundExpense RatioAUMDescriptionYTD Performance (%)
PUI PowerShares DWA Utilities Momentum Portfolio0.60%$232.21MMomentum factor23.82
UTES Reaves Utilities ETF0.95%$11.24MActively managed22.92
FXU First Trust Utilities AlphaDEX Fund0.66%$1.82BValue and growth factors22.6
VPU Vanguard Utilities Index Fund0.10%$2.61BBroad, market-cap-weighted22.01
RYU Guggenheim S&P 500 Equal Weight Utilities ETF0.40%$295.71MEqual-weighted21.78
IDU iShares U.S. Utilities ETF0.45%$1.16BBroad, market-cap-weighted21.7
FUTY Fidelity MSCI Utilities Index ETF0.08%$277.24MBroad, market-cap-weighted21.64
XLU Utilities Select Sector SPDR Fund0.14%$8.32BBroad, market-cap-weighted21.53
PSCU PowerShares S&P SmallCap Utilities Portfolio0.29%$153.62MSmall caps21.32
JHMUJohn Hancock Multifactor Utilities ETF0.50%$5.34MSize, value, momentum, profitability factorsN/A
UTLFiShares Edge MSCI Multifactor Utilities ETF0.35%$2.66MSize, value, momentum, quality factorsN/A

 

Global Utilities ETFs

The final batch of utility ETFs are globally focused, which contrasts with the aforementioned funds that are solely focused on the U.S.

These ETFs include the iShares Global Utilities ETF (JXI | A-85), the WisdomTree Global ex-US Utilities Fund (DBU | C-74) and the SPDR S&P International Utilities Sector ETF (IPU | B-80). There is more divergence of performance among these three, with a range of returns from 4.6% to 13.5%.

Out of the three, JXI is the best performer in 2016, thanks to its exposure to surging U.S. utilities. Its broad, market-cap-weighted exposure to the global utility space gives the U.S. a 57% weighting in the fund.

On the other hand, DBU and IPU completely exclude U.S. utilities. In turn, the United Kingdom is the largest country exposure for both funds. DBU weights its holdings based on dividends, while IPU weights them based on market cap.

TickerFundExpense RatioAUMDescriptionYTD Performance (%)
JXIiShares Global Utilities ETF0.48%$168.57MBroad, market-cap-weighted13.52
DBUWisdomTree ex-US Utilities Fund0.58%$15.38MEx-US, dividend-weighted7.82
IPUSPDR S&P International Utilities Sector ETF0.40%$32.1MEx-US, market-cap-weighted4.59

 

Contact Sumit Roy at [email protected].

 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.