Top Energy ETFs of 2023: Lowest Fees, Best Returns & Highest Liquidity

In 2023, the energy ETF landscape is defined by three standout funds: Fidelity MSCI Energy Index ETF (FENY) with the lowest expense ratio, SPDR S&P Oil & Gas Equipment & Services ETF (XES) delivering the strongest one-year returns, and Energy Select Sector SPDR Fund (XLE) boasting the highest trading volume and liquidity.

Following the surge in oil and gas prices in 2022 triggered by geopolitical tensions and supply constraints, the market has since stabilized. Natural gas prices plunged by 70%, while crude oil indices dropped 28% over the past year. This shift caused the energy sector to lag behind the broader market, with the S&P Energy Select Sector Index rising just 5.3% compared to the S&P 500's 14.6% growth.

Key Insights

• Energy stocks have underperformed the broader market by nearly 10 percentage points in the last year.
• Leading energy ETFs provide diverse options for investors seeking broad or niche exposure within the energy sector.
• The top ETFs balance cost efficiency, return potential, and liquidity to suit different investment strategies.

Among more than 50 energy ETFs available in the U.S., excluding leveraged and inverse funds or those with under $50 million in assets, these three ETFs stand out for their performance and characteristics as of June 22, 2023.

Lowest Fee Energy ETF: Fidelity MSCI Energy Index ETF (FENY)

• 1-Year Return: 15.6%
• Expense Ratio: 0.08%
• 30-Day SEC Yield: 3.32%
• Average Daily Volume: 847,721 shares
• Assets Under Management: $1.3 billion
• Launch Date: October 21, 2013
• Provider: Fidelity

FENY is a passively managed ETF tracking the MSCI USA IMI Energy Index, encompassing a broad spectrum of large, mid, and small-cap energy firms. Exxon Mobil Corp. (XOM) represents nearly 23% of its holdings. This fund primarily targets North American oil and gas companies, with a modest allocation to energy equipment manufacturers.

Best 1-Year Return Energy ETF: SPDR S&P Oil & Gas Equipment & Services ETF (XES)

• 1-Year Return: 29.8%
• Expense Ratio: 0.35%
• 30-Day SEC Yield: 0.51%
• Average Daily Volume: 85,094 shares
• Assets Under Management: $261.6 million
• Launch Date: June 19, 2006
• Provider: State Street Global Advisors

XES follows the S&P Oil & Gas Equipment & Services Select Industry Index and employs a modified equal-weighted approach, giving smaller companies a greater impact on performance. This structure introduces higher volatility but offers investors the chance for amplified gains within the energy equipment and services sector.

Most Liquid Energy ETF: Energy Select Sector SPDR Fund (XLE)

• 1-Year Return: 14.8%
• Expense Ratio: 0.10%
• 30-Day SEC Yield: 3.76%
• Average Daily Volume: 20,217,487 shares
• Assets Under Management: $32.5 billion
• Launch Date: December 16, 1998
• Provider: State Street Global Advisors

XLE tracks the Energy Select Sector Index, focusing on U.S. companies engaged in oil, gas, consumable fuels, and energy equipment and services. Its low fees and exceptional liquidity make it a preferred choice for investors seeking efficient market access.

Disclaimer: This information is for educational purposes only and does not constitute investment advice. The author holds no positions in the discussed ETFs as of this writing.

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