The iShares MSCI EAFE ETF (EFA) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between EFA and XLY? And which fund is better?
The expense ratio of EFA is 0.20 percentage points higher than XLY’s (0.32% vs. 0.12%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided lower returns than XLY over the past ten years.
In this article, we’ll compare EFA vs. XLY. We’ll look at performance and annual returns, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss EFA’s and XLY’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.
Summary
| EFA | XLY | |
| Name | iShares MSCI EAFE ETF | Consumer Discretionary Select Sector SPDR Fund |
| Category | Foreign Large Blend | Consumer Cyclical |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 56.77B | 20.21B |
| Avg. Return | 6.47% | 18.86% |
| Div. Yield | 2.28% | 0.63% |
| Expense Ratio | 0.32% | 0.12% |
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
EFA’s dividend yield is 1.65% higher than that of XLY (2.28% vs. 0.63%). Also, EFA yielded on average 12.39% less per year over the past decade (6.47% vs. 18.86%). The expense ratio of EFA is 0.20 percentage points higher than XLY’s (0.32% vs. 0.12%).
Fund Composition
Industry Exposure
| EFA | XLY | |
| Technology | 9.68% | 0.57% |
| Industrials | 15.01% | 0.0% |
| Energy | 3.51% | 0.0% |
| Communication Services | 5.68% | 0.0% |
| Utilities | 3.35% | 0.0% |
| Healthcare | 12.8% | 0.0% |
| Consumer Defensive | 10.56% | 5.34% |
| Real Estate | 3.01% | 0.0% |
| Financial Services | 16.88% | 0.0% |
| Consumer Cyclical | 11.62% | 94.1% |
| Basic Materials | 7.91% | 0.0% |
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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
EFA is 16.88% more exposed to the Financial Services sector than XLY (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 15.01% higher and 12.80% higher respectively (15.01% vs. 0.0% and 12.8% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 12.54% more of the fund’s holdings compared to XLY (12.54% vs. 0.00%).
Holdings
| EFA Holdings | Weight |
| Nestle SA | 2.11% |
| ASML Holding NV | 1.69% |
| Roche Holding AG | 1.55% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.28% |
| Novartis AG | 1.19% |
| Toyota Motor Corp | 1.09% |
| AstraZeneca PLC | 0.92% |
| Unilever PLC | 0.9% |
| AIA Group Ltd | 0.88% |
| SAP SE | 0.86% |
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%.
| XLY Holdings | Weight |
| Amazon.com Inc | 22.9% |
| Tesla Inc | 13.5% |
| The Home Depot Inc | 8.74% |
| McDonald’s Corp | 4.5% |
| Nike Inc B | 4.45% |
| Lowe’s Companies Inc | 3.58% |
| Starbucks Corp | 3.44% |
| Target Corp | 3.12% |
| Booking Holdings Inc | 2.35% |
| TJX Companies Inc | 2.12% |
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
Risk Analysis
| EFA | XLY | |
| Mean Return | 0.57 | 1.47 |
| R-squared | 96.78 | 80.84 |
| Std. Deviation | 15.01 | 15.97 |
| Alpha | 0.47 | 6.96 |
| Beta | 0.98 | 1.02 |
| Sharpe Ratio | 0.41 | 1.06 |
| Treynor Ratio | 5.33 | 16.69 |
The iShares MSCI EAFE ETF (EFA) has a Treynor Ratio of 5.33 with a Sharpe Ratio of 0.41 and a R-squared of 96.78. Its Alpha is 0.47 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Standard Deviation of 15.01 and a Beta of 0.98.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Sharpe Ratio of 1.06 with a Standard Deviation of 15.97 and a Treynor Ratio of 16.69. Its Mean Return is 1.47 while XLY’s R-squared is 80.84. Furthermore, the fund has a Alpha of 6.96 and a Beta of 1.02.
EFA’s Mean Return is 0.90 points lower than that of XLY and its R-squared is 15.94 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than XLY. The Alpha and Beta of EFA are 6.49 points lower and 0.04 points lower than XLY’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | XLY |
| 2020 | 7.92% | 29.66% |
| 2019 | 21.94% | 28.43% |
| 2018 | -13.83% | 1.66% |
| 2017 | 24.94% | 22.77% |
| 2016 | 0.96% | 5.87% |
| 2015 | -0.9% | 9.93% |
| 2014 | -5.04% | 9.49% |
| 2013 | 22.62% | 42.74% |
| 2012 | 17.22% | 23.6% |
| 2011 | -12.18% | 5.98% |
| 2010 | 7.52% | 27.36% |
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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| XLY | $10,000 | $63,066 | 18.86% |
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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.
EFA’s CAGR is 12.39 percentage points lower than that of XLY and as a result, would have yielded $44,797 less on a $10,000 investment. Thus, EFA performed worse than XLY by 12.39% annually.
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