Top 9 energy ETFs: Can XLE, FENY protect against market volatility?

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Top 9 energy ETFs: Can XLE, FENY protect against market volatility?

 Top 9 energy ETFs: Can XLE, FENY protect against market volatility?
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Highlights

  • Energy Select Sector SPDR Fund (XLE) generated a 19.85% return YTD. The ETF has an expense ratio of 0.12%.

  • Vanguard Energy ETF (VDE) generated an 18.21% return YTD. It has an expense ratio of 0.10%.

  • Fidelity MSCI Energy Index (FENY) ETF generated an 18.19% return year-to-date. Its expense ratio is 0.08%. 

The energy sector has many big players. But major geopolitical tensions adversely affect the industry. The ongoing Ukraine crisis triggered a massive oil price rally on supply concerns.  

Analysts expect the benchmark Brent crude to hit US$100 per barrel by the year-end.  

The Bloomberg Brent Crude Subindex, formerly Dow Jones-UBS Brent Crude Subindex, rose 62.23% in one year and 19.05% YTD, outperforming the S&P 500’s 13.81% one-year return. 

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Energy ETFs invests in oil, gas, and alternate energy companies.

The following are nine energy ETFs based on top assets under management.

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Energy Select Sector SPDR Fund (XLE)

Expense ratio – 0.12% 

Asset under management (AUM) - US$35.05 billion  

50 days daily average volume - 21,952,217

Total holdings - 23 

 The XLE ETF offers exposure to US energy companies based on weighted market cap. These companies are engaged in oil and gas, consumable fuels, energy equipment and service industries. There is also a capping of 25% on a single stock holding at each quarterly rebalance.

 This open-ended fund was launched in 1998 by State Street Global Advisor. It tracks S&P Energy Select Sector Index.

 Its top three holdings include Exxon Mobil (XOM), and Chevron (CVS), which account for more than 20%, followed by EOG Resources (EOG) with around 5%.

 XLE generated a 19.85% return YTD and closed at US$68.58 on February 16, 2022.

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Vanguard Energy ETF (VDE)

Expense ratio – 0.10% 

Asset under management (AUM) - US$7.35 billion 

50 days daily average volume - 718,452

Total holdings - 104 

The VDE ETF invests in energy stocks in the US. The fund includes energy companies across sub-industries classified by the GICS and selects companies considered investible by MSCI.

VDE tracks MSCI US Investible Market Energy 25/50 Index. VDE is an open-ended fund launched in 2004 by Vanguard. VDE generated an 18.21% return YTD and closed at US$94.69 on February 16, 2022.

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Alerian MLP ETF (AMLP)

 Expense ratio – 0.90% 

Asset under management (AUM) - US$6.2 billion 

50 days daily average volume - 3,348,662

Total holdings - 18

The AMLP invests in the energy infrastructure MLPs (master limited partnership). MLP is a publicly-traded entity but taxed as a partnership. The companies listed on its market-cap-weighted index earn primarily from midstream activities. 

Launched in 2010 by SS&C, this ETF is structured as a C-Corporation, which means the fund allows total allocation to MLPs. It tracks Alerian MLP Infrastructure. 

AMLP generated a 10.00% return YTD and closed at US$37.05 on February 16, 2022.

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(Top nine Energy ETFs in the US to consider) 

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SPDR S&P Oil & Gas Exploration & Production - (XOP)

Expense ratio – 0.35% 

Asset under management (AUM) - US$4.6 billion 

50 days daily average volume - 6,544,361

Total holdings - 61

XOP offers exposure to the oil and gas exploration and production segment companies of the S&P Total Market Index. It provides an equal-weighted approach for selecting the stocks. The index is reviewed and rebalanced quarterly.

The ETF was launched in 2006 by State Street Global Advisors. The open-ended fund tracks S&P oil and gas exploration & production select industry index.

XOP generated a 9.07% return YTD and closed at US$109.53 on February 16, 2022.

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iShares U.S. Energy - (IYE)

Expense ratio – 0.41% 

Asset under management (AUM) - US$2.96 billion 

50 days daily average volume - 1,378,217

Total holdings - 39

IYE invests in energy companies in the US. Its tracks Russell 1000 Energy RIC 22.5/45 Capped Index. Earlier, it had tracked the Dow Jones US Oil & Gas Index.

 This open-ended ETF was launched in 2000 by Blackrock.  

IYE generated a 17.39% return YTD and closed at US$36.39 on February 16, 2022.

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VanEck Oil Services - (OIH)

Expense ratio – 0.35% 

Asset under management (AUM) - US$2.8 billion 

50 days daily average volume - 544,603

Total holdings - 26

The OIH ETF invests in the 25 largest and most liquid oil services companies listed in the US. Although it has some exposure in overseas companies, the fund primarily focuses on US companies. The index is rebalanced semi-annually. Its tracks the MVIS US Listed Oil Service 25 Index. The open-ended fund was launched in 2001 by VanEck. 

The OIH generated a 25.98% return YTD and closed at US$248.54 on February 16, 2022.

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First Trust North American Energy Infrastructure Fund - (EMLP)

Expense ratio – 0.96% 

Asset under management (AUM) - US$2.2 billion 

50 days daily average volume - 533,380

Total holdings - 62

EMLP is an actively managed fund that invests in energy infrastructure MLPs and LLCs. But unlike other MLPs, which are structured as C-corporations, EMLP is structured as a traditional 1940 Act fund. It was launched in 2012 by First Trust. 

EMLP generated a 1.12% return YTD and closed at US$25.34 on February 16, 2022.

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(Top nine Energy ETFs in the US to consider)

Source - pixabay

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iShares Global Energy (IXC)

Expense ratio – 0.43% 

Asset under management (AUM) - US$1.84 billion 

50 days daily average volume - 687,537

Total holdings - 49

IXC offers exposure to global energy companies. The global energy market is home to major mega-cap oil and gas companies, so its portfolio has a large-cap bias. It selects companies on a weighted market cap basis. Blackrock launched this open-ended fund in 2021. It tracks the S&P Global 1200 Energy Sector Index.     

 The IXC generated an 18.12% return YTD and closed at US$33.37 on February 16, 2022.

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Fidelity MSCI Energy Index (FENY)

Expense ratio – 0.08% 

Asset under management (AUM) - US$1.3 billion 

50 days daily average volume - 591,375

Total holdings - 107

 The FENY ETF offers exposure to the US energy segment. The top-heavy portfolio reflects more than half held by the top 10 companies. The ETF invests in almost every aspect of the oil and gas industry, including exposure to coal and renewables.

This open-ended fund was launched by Fidelity in 2013. It tracks the MSCI US Investable Market Energy 25/50 Index. FENY generated an 18.19% return YTD and closed at US$18.52 on February 16, 2022.

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Bottomline

 The S&P 500 Energy Sector Index saw gains of 49.42% in one year. The ETFs offer exposure to different sectors; however, investors should choose ETFs according to their interests.

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