Frank Greywitt, portfolio manager and co-head of global infrastructure securities at Deutsche Asset & Wealth Management, says the db X-trackers Regulated Utilities Fund (UTLT) combines the potential for equity returns with lower volatility and the income potential of fixed income.
“Unlike other utility funds out there, this is the only fund that is exclusively invested in global regulated utilities and therefore the only product with that stringent focus on these types of companies,” Greywitt claims. The fund provides a long-term inflation hedge and currently is expected to yield a little more than 3.5%.
“This is due to the stable cash flows and the very low volatility that these companies display,” Greywitt says.
The UTLT fund tracks the DBIQ Regulated Utilities Index. Its net expense ratio is 0.45 percent.
Regulated utilities earn a rate of return on their investment that’s set by a regulatory body. Those steady Eddie returns provide a ballast during various economic conditions, and during periods of high inflation utilities can go to regulators and ask permission to pass through their higher costs to consumers in order to maintain their expected rate of return, Greywitt explains.
“We would position this [fund] as a very low beta equity or perhaps as a compliment to a fixed-income portfolio for those who want to diversify away from bonds and start moving into equities,” Greywitt says.
Deutsche Asset & Wealth Management manages 55 ETPs in the U.S. (23 ETFs and 32 exchange-traded notes) with roughly $11.6 billion in assets under management. It manages more than 200 ETPs globally.