The iShares MSCI EAFE ETF (EFA) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between EFA and XLV? And which fund is better?
The expense ratio of EFA is 0.20 percentage points higher than XLV’s (0.32% vs. 0.12%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than XLV over the past ten years.
In this article, we’ll compare EFA vs. XLV. We’ll look at performance and risk metrics, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss EFA’s and XLV’s portfolio growth, holdings, and fund composition and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||Health Care Select Sector SPDR Fund|
|Category||Foreign Large Blend||Health|
|Issuer||iShares||SPDR State Street Global Advisors|
The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
EFA’s dividend yield is 0.88% higher than that of XLV (2.28% vs. 1.4%). Also, EFA yielded on average 8.55% less per year over the past decade (6.47% vs. 15.02%). The expense ratio of EFA is 0.20 percentage points higher than XLV’s (0.32% vs. 0.12%).
The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.
EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.
The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
EFA is 16.88% more exposed to the Financial Services sector than XLV (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 15.01% higher and 87.20% lower respectively (15.01% vs. 0.0% and 12.8% vs. 100.0%). In total, Utilities, Energy, and Communication Services also make up 12.54% more of the fund’s holdings compared to XLV (12.54% vs. 0.00%).
|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
|Johnson & Johnson||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Treynor Ratio of 5.33 and a Standard Deviation of 15.01. Its Sharpe Ratio is 0.41 while EFA’s Beta is 0.98. Furthermore, the fund has a Alpha of 0.47 and a R-squared of 96.78.
The Health Care Select Sector SPDR Fund (XLV) has a Standard Deviation of 12.94 with a Treynor Ratio of 21.1 and a Alpha of 7.75. Its Beta is 0.7 while XLV’s R-squared is 58.19. Furthermore, the fund has a Mean Return of 1.27 and a Sharpe Ratio of 1.13.
EFA’s Mean Return is 0.70 points lower than that of XLV and its R-squared is 38.59 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than XLV. The Alpha and Beta of EFA are 7.28 points lower and 0.28 points higher than XLV’s Alpha and Beta.
EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% respectively.
The year 2013 was the strongest year for XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFA would have resulted in a final balance of $18,269. This is a profit of $8,269 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
With a $10,000 investment in XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.
EFA’s CAGR is 8.55 percentage points lower than that of XLV and as a result, would have yielded $25,878 less on a $10,000 investment. Thus, EFA performed worse than XLV by 8.55% annually.
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