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Why Franklin Utilities Shines

David Kathman, CFA, Ph.D.

David Kathman: Franklin Utilities and MFS Utilities are the two biggest actively managed funds in the utilities category. They're both very good funds with long-tenured managers and strong records, but Franklin Utilities earns a Morningstar Analyst Rating of Gold, while MFS Utilities only earns a Bronze rating. 

There are a few reasons for that. The Franklin fund's lead manager, John Kohli, has been in place for 20 years, so he has a lot of experience and an excellent track record. The MFS fund's lead manager, Maura Shaughnessy, has been in charge even longer, and has a similarly strong track record, but she just announced that she’s retiring this coming August, so her comanagers, Claud Davis and Scott Walker, will be running the fund after that. Although they’ve worked with Shaughnessy for a long time as analysts, they only have a few years experience as fund managers, so they'll need to prove themselves once they take over. 

Another factor is fees. Both of these funds are pretty cheap relative to their peers, but the Franklin fund is the cheaper of the two, with a 0.73% expense ratio for the A shares, versus 1.01% for the A shares of the MFS fund. That gives it a significant advantage right off the bat, and helps make it a top pick in the utilities category.