ETF Trends
ETF Trends

Assets have started to flow into the largest U.S. Energy Equity focused ETF, XLE (SPDR Energy Select, Expense Ratio 0.16%), as it has pulled in more than $1.8 billion in new dollars just this month, giving it an overall asset base of just shy of $12 billion.

In spite of violent price gyrations and a vicious sell-off in Energy Prices (amid falling Crude Oil prices) that lasted from October until mid-December before largely stabilizing recently, XLE has actually had a rather strong year in terms of attracting net assets, adding more than $4.7 billion year to date. Heavy two large cap integrated Oil & Gas names, XOM makes up >16.2% of the portfolio followed by CVX which carries a >13.1% weighting. Notably, even at current levels following the rebound in recent weeks in the sector, XLE still boasts a yield of about 2.23% versus about 1.78% on SPY.

There is no doubt that there are both fundamentally conscious and value focused investment managers that have stuck their necks out recently and accumulated some Energy equities, if not via XLE by way of some of the other sector specific funds in this category, as well as those that may be dividend yield focused in an environment where broad based equity indices generally are hitting “new all time highs” day after day lately.

XLE has a notable AUM advantage over the next closest competitor in the space VDE (Vanguard Energy, Expense Ratio 0.14%) which has about $3.3 billion in AUM, and other household name funds in this category include IYE (iShares U.S. Energy, Expense Ratio 0.46%), XOP (SPDR Oil & Gas Exploration & Production, Expense Ratio 0.35%), and OIH (Market Vectors Oil Services, Expense Ratio 0.35%). The index construction in each of the aforementioned products is unique in each case, with differing exposures not only to various “market caps” but also within the sub-categories inside of “Energy Equity” like Oil Equipment and Services, and Oil and Gas Exploration for example.

It is not only the “long-only” Energy ETFs that have participated in asset growth in 2014 in spite of a volatile year, but some of the leveraged ETFs in this space have come into focus as well. Take ERX (Direxion Daily Energy Bull 3X Shares, Expense Ratio 0.95%) for example which has pulled in a notable >$270 million year to date and increasing its average daily volume to 2.2 million shares while its sister “Bear” ETF ERY (Direxion Daily Energy Bear 3X Shares, Expense Ratio 0.95%) remains notionally smaller with $58 million in assets, but it trades more shares daily currently (>3.5 million shares in ADV). ERX and ERY have become increasingly popular with short term directional traders as well as institutional hedgers whom are trading XLE itself in most cases, as the funds track the same underlying index just with the three times daily leverage component.

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