My Cousin Vinny Would Love This ETF

Vinny Gambini said “yutes” and there are the Utes of University of Utah fame, but let's talk about the Reaves Utilities ETF UTES.

It has been just over a year since UTES came to market as the first actively managed utilities exchange traded fund. Coming to market a year ago was good timing on the part of UTES. There has been just one rate hike from the Federal Reserve over that period, helping the utilities to be one of the best-performing sectors over that stretch.

UTES plays in a crowded field of lower cost, passively managed utilities ETFs, meaning any higher cost competitor, like UTES, has to deliver the goods in terms of performance. The active utilities ETF, managed by New Jersey-based Reaves Asset Management, is doing just that. Reaves has over 50 years of experience in managing utilities investments across mutual funds and separately managed accounts. The company has been managing institutional assets for nearly four decades. 

UTES offers another advantage for investors over other actively managed funds: Daily disclosure of its holdings. Some issuers of actively managed products, including some wanting to wear the exchange traded label, are maintaining an old Wall Street mentality, refusing to disclose their holdings on a daily basis. That is not the case with UTES as investors can see the new ETF's holdings updated daily as is the case with most traditional, passive ETFs.

Since coming to market, UTES is up 23 percent as of September 29 compared to an average return of 14.85 percent for the two largest passively managed utilities fees. Yes, those ETFs carry significantly lower fees than the 0.95 percent per year charged by UTES, but the performance gap between UTES and its passive rivals has been so wide that the savings on fees with the passive products is rendered moot.

“Entering its second year of operations, Reaves Utilities ETF intends to continue to invest in securities across the utilities sector, including but not limited to firms that participate in electrical distribution and transmission, gas distribution, water distribution, independent power producers and YieldCos, as well as vertically integrated and traditional utilities,” said Reaves in a statement.