3 Utilities Mutual Fund Trends Shaping Wall Street's Defensive Play

The utilities sector on Wall Street has delivered a resilient performance in 2026, with the State Street Utilities Select Sector SPDR ETF (XLU) emerging as a key barometer. As of April 8, XLU has gained roughly 8.9% year to date, clearly outperforming a volatile broader market.

A major driver behind this performance has been the sector’s defensive appeal. In an environment marked by geopolitical tensions and equity-market swings, utilities, known for stable cash flows, have attracted capital as a low-beta haven. Falling bond yields have further boosted their attractiveness, as income-seeking investors rotate toward dividend-paying stocks.

At the same time, a structural growth narrative has emerged. The rapid expansion of artificial intelligence (AI) infrastructure has significantly increased electricity demand, positioning utilities as indirect beneficiaries of the AI boom. This has triggered optimism around long-term earnings visibility, grid expansion and capital expenditure cycles.

However, the sector’s journey in 2026 has not been linear. After rallying strongly in late 2025, utilities witnessed bouts of volatility and short-term relative weakness amid broader sector rotation and profit-taking. Concerns around valuation, modest earnings growth and sensitivity to interest-rate expectations have occasionally capped upside momentum.

Overall, utilities have transitioned from a purely defensive allocation to a hybrid theme. They are currently assuming the garb of part safety and part AI-driven growth proxy. While near-term fluctuations persist, the sector’s year-to-date performance underscores its evolving role in portfolios navigating uncertainty and structural change.

Thus, in this environment, utility mutual funds provide stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have thus selected three utility mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.

Cohen & Steers Global Infrastructure CSUZX primarily invests in common stocks and other equity securities of infrastructure companies across the United States and abroad, including utilities, pipelines, toll roads, airports, railroads, ports and telecommunications firms. It also maintains a meaningful allocation to companies outside the United States or those with significant international operations, adjusting this exposure based on market conditions.

Thuy Quynh Dang has been the lead manager of CSUZX since January 2022. Three top holdings of CSUZX are NextEra Energy (6.3%), Williams (4.7%) and TC Energy (4.6%).

CSUZX’s 3-year and 5-year annualized returns are 14.6% and 11.1%, respectively. Its net expense ratio is 0.86%. CSUZX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Utilities FSUTX primarily invests in common stocks of companies engaged in the utilities industry, including domestic and foreign issuers. It relies on fundamental analysis of financial strength, industry position and economic conditions to select holdings and operates as a non-diversified fund.

Pranay Kirpalani has been the lead manager of FSUTX since December 2024. Three top holdings of FSUTX are NextEra Energy (13.2%), Constellation Energy (9.3%) and Duke Energy (7%).

FSUTX’s 3-year and 5-year annualized returns are 20.8% and 16.4%, respectively. Its net expense ratio is 0.65%. FSUTX has a Zacks Mutual Fund Rank #1.

Franklin Utilities FKUQX typically invests the majority of its net assets in public utilities and related service providers, focusing on companies delivering electricity, natural gas, water and communications. Part of its assets is concentrated in the utilities industry. It invests mainly in equity securities, primarily common stocks.

John Kohli has been the lead manager of FKUQX since September 2018. Three top holdings of FKUQX are NextEra Energy (8.6%), Entergy (5.6%) and Vistra (5.4%).

FKUQX’s 3-year and 5-year annualized returns are 18.8% and 15.2%, respectively. Its net expense ratio is 0.80%. FKUQX has a Zacks Mutual Fund Rank #1.

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