Utilities and Low-Volatility ETFs

Among the leaders in terms of net asset flows in recent sessions via creations are Utility names, as the largest ETF in the segment, SPDR Utilities (NYSEArca: XLU), continues to trade at new multi-year highs.

Yielding 3.95% with an expense ratio of 0.18%, the sector ETF continues to march forward as investment managers (as has been well documented) have been searching for yield for the past several years in the market place given relative bond yields.

Interestingly, XLU was pummeled in early November last year, staggering more than 8% inside of ten trading sessions on fears that a new U.S. presidential administration would have severe implications on how dividends were treated, and we saw heavy selling pressure not only in the Utilities sector but also segments like REITs and MLPs for that brief amount of time. [Utilities ETFs Fall Before Fiscal Cliff]

In retrospect, that brief period was an enormous buying opportunity given the swift reversal across the board back to the upside inside of 3 months.

XLU has pulled in north of $200 million in recent sessions in terms of inflows, and has an asset base of about $5.7 billion currently.

Top holdings are DUK, SO, D, NEE, and EXC, and we should also point out parallels here between this fund and PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) — expense ratio 0.25%.