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Is Invesco S&P 500 Equal Weight Utilities ETF (RYU) a Strong ETF Right Now?
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Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Utilities ETF is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $248.96 million, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. RYU seeks to match the performance of the S&P 500 Equal Weight Telecommunication Services & Utilities Index before fees and expenses.
This index is an unmanaged equal weighted version of the S&P 500 Utilities Index that consists of common stocks of the following industries: electric utilities, gas utilities, multi-utilities & unregulated power & water utilities,telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth & fiber-optic cable networks.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.40% for RYU, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 2.65%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Utilities sector - about 100% of the portfolio.
Looking at individual holdings, Nrg Energy Inc (NRG - Free Report) accounts for about 4.03% of total assets, followed by Nextera Energy Inc (NEE - Free Report) and American Electric Power Co Inc (AEP - Free Report) .
Its top 10 holdings account for approximately 36.79% of RYU's total assets under management.
Performance and Risk
So far this year, RYU has gained about 10.15%, and is up roughly 7.84% in the last one year (as of 10/15/2021). During this past 52-week period, the fund has traded between $93.39 and $112.58.
The ETF has a beta of 0.43 and standard deviation of 25.15% for the trailing three-year period, making it a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Utilities ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.93 billion in assets, Utilities Select Sector SPDR ETF has $12.43 billion. VPU has an expense ratio of 0.10% and XLU charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Invesco S&P 500 Equal Weight Utilities ETF (RYU) a Strong ETF Right Now?
Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Utilities ETF is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $248.96 million, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. RYU seeks to match the performance of the S&P 500 Equal Weight Telecommunication Services & Utilities Index before fees and expenses.
This index is an unmanaged equal weighted version of the S&P 500 Utilities Index that consists of common stocks of the following industries: electric utilities, gas utilities, multi-utilities & unregulated power & water utilities,telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth & fiber-optic cable networks.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.40% for RYU, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 2.65%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Utilities sector - about 100% of the portfolio.
Looking at individual holdings, Nrg Energy Inc (NRG - Free Report) accounts for about 4.03% of total assets, followed by Nextera Energy Inc (NEE - Free Report) and American Electric Power Co Inc (AEP - Free Report) .
Its top 10 holdings account for approximately 36.79% of RYU's total assets under management.
Performance and Risk
So far this year, RYU has gained about 10.15%, and is up roughly 7.84% in the last one year (as of 10/15/2021). During this past 52-week period, the fund has traded between $93.39 and $112.58.
The ETF has a beta of 0.43 and standard deviation of 25.15% for the trailing three-year period, making it a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Utilities ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.93 billion in assets, Utilities Select Sector SPDR ETF has $12.43 billion. VPU has an expense ratio of 0.10% and XLU charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.