FUTY Delivers 64% in Five Years While Charging Investors Next to Nothing

Utilities have long been the portfolio’s boring backbone: predictable dividends, regulated cash flows, and a tendency to hold up when riskier assets sell off. Fidelity MSCI Utilities Index ETF (NYSEARCA:FUTY) packages that idea into a single fund at near-zero cost, but what investors actually own is more nuanced than the classic defensive utility story.

What FUTY Is Designed to Do

FUTY tracks the MSCI USA IMI Utilities 25/50 Index, a market-cap-weighted benchmark covering the full U.S. utilities sector. The fund charges an expense ratio of 0.084%, among the lowest for any sector ETF. With $2.48 billion in net assets and a 2013 inception date, it has a long enough track record to evaluate through multiple rate cycles.

The return engine is straightforward: regulated utility businesses earn predictable returns on their rate bases, pass costs through to customers under state-approved agreements, and distribute a large share of earnings as dividends. The dividend yield sits near 2.5%, which functions as the income floor while capital appreciation depends on the rate environment and earnings growth.

The index uses a 25/50 concentration cap, meaning no single issuer can exceed 25% and companies above 5% collectively cannot exceed 50%. In practice, NextEra Energy represents 12.33% of the fund, more than double the second-largest holding. The top five names — NextEra Energy (NYSE:NEE), Southern Co (NYSE:SO | SO Price Prediction), Duke Energy (NYSE:DUK), Constellation Energy (NASDAQ:CEG), and American Electric Power (NASDAQ:AEP) — together account for roughly 35% of the portfolio across 65 total positions.

The AI Power Twist Hidden Inside a Defensive ETF

Investors buying FUTY as a pure bond proxy are getting something different. The MSCI utilities index includes competitive merchant power companies alongside regulated utilities, and two top-ten holdings — Constellation Energy and Vistra Corp (NYSE:VST) — operate in deregulated markets, earn revenue from wholesale power prices, and have signed long-term power purchase agreements with hyperscalers including Microsoft, Meta, and Amazon Web Services to supply carbon-free nuclear electricity to data centers.

Constellation completed its acquisition of Calpine in January 2026, creating the nation’s largest private power producer at 55 GW of combined capacity. Vistra has guided for 2026 adjusted EBITDA of $6.8 billion to $7.6 billion. These are growth stories. Their inclusion gives FUTY meaningful sensitivity to the AI electricity demand theme.

Does the Fund Deliver on Its Promise?

FUTY has performed well recently. The fund is up 20% over the past year and 6.6% year-to-date, tracking closely with the SPDR Utilities ETF (XLU), which returned 20.4% over the same one-year period. The five-year returns are nearly identical — FUTY up 64% versus XLU up 66% — meaning the primary advantage FUTY holds over its closest competitor is cost, not composition.

The underlying fundamentals support recent performance. Duke Energy delivered FY2025 adjusted EPS of $6.31 with a $103 billion five-year capital plan. American Electric Power reported FY2025 net income up 21% and has signed agreements for 56 GW of incremental load by 2030. NextEra grew full-year 2025 adjusted EPS by more than 8% and targets the same 8%+ compound annual growth rate through 2032.

Three Tradeoffs Worth Understanding

1. Interest rate sensitivity: Utilities carry large debt loads to fund infrastructure, and their dividend yields compete directly with Treasury yields. The 10-year Treasury currently sits at 4.33%, up 30 basis points over the past month. At that level, FUTY’s roughly 2.5% dividend yield offers limited income premium over risk-free alternatives, compressing valuations when rates rise further.
2. Merchant power volatility: Constellation and Vistra behave differently from regulated utilities during market stress. A Reddit post in late March titled “VST & CEG getting absolutely hammered today” captured a session where both names fell sharply on rising yields and cooling AI sentiment. Vistra is down 5.5% year-to-date and Constellation is down 16% year-to-date, creating drag even as traditional regulated names have held up.
3. Concentration in the top holding: NextEra’s 12% weight means a single stock’s performance materially moves the fund. Its Q4 2025 adjusted EPS of $0.54 missed consensus by 41%, though the full-year result remained strong.

FUTY functions as a defensive income sleeve for investors seeking broad U.S. utilities exposure at minimal cost, but the presence of merchant power names means it carries more cyclical risk than its label suggests. Investors expecting pure bond-proxy behavior during rate spikes should account for that distinction.