Utility stocks are supposed to be defensive investments. When the rest of the stock market is in turmoil, utilities provide ballast, thanks to their above-average dividend yields and the fact that utilities are somewhat insulated from the ups and downs of the economy.

But some utility mutual funds may not be so tame. They are stuffing their portfolios with stocks that are far removed from what most of us think of as utilities - namely, electricity and natural-gas distributors. And it shows in their returns.From April 22 to June 16, Standard & Poor's 500-stock index dropped 4.5 percent. During that minicorrection, some utility funds did well. Galaxy II Utility Index fund, for example, returned 2.4 percent. But a lot of others sank right along with the rest of the market. The worst, Lindner Utility fund, dropped 9.3 percent. The Galaxy fund is almost entirely in electric companies, plus a few natural-gas suppliers.

Among actively managed funds, Franklin Utilities is the most similar to the utility index. Recently, 88 percent of its assets (including a smattering of convertible bonds) were in electric companies, and the rest were in phone and natural-gas stocks.

"Basically, whenever you get into a high-volatility market, there's a flight to quality, and electrics are still considered high-quality investments," says lead manager Sally Haff.

Moreover, because electric stocks yield more than gas and phone issues, they are more attuned to movements in the bond market. Thus, with the recent decline in yields, electric stocks got an extra power boost.

Even electric utility stocks are not quite the safe haven they once were. Deregulation in that industry is leading to more competition. Plainly, some electrics will grow at the expense of some others.

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At the opposite extreme from Franklin is Lindner Utility.

"We broadened the whole concept of what's called a utility," says co-manager Rick Eckenrodt. "With all the deregulation going on, it was obvious to us that there was no such thing as a safe haven anymore."

The fund invests in such businesses as cable TV, oil producers and energy-services companies. In fact, says Eckenrodt, it was the fund's 31 percent allocation to energy stocks and 15 percent investment in foreign stocks, including Russian issues, that explain its recent miseries.

If it's yield and safety you want, look under the hood of a utility fund before investing in it.

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