The iShares Core MSCI EAFE ETF (IEFA) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between IEFA and XLC? And which fund is better?
The expense ratio of IEFA is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than XLC over the past ten years.
In this article, we’ll compare IEFA vs. XLC. We’ll look at portfolio growth and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss IEFA’s and XLC’s performance, risk metrics, and holdings and examine how these affect their overall returns.
Summary
| IEFA | XLC | |
| Name | iShares Core MSCI EAFE ETF | Communication Services Select Sector SPDR Fund |
| Category | Foreign Large Blend | Communications |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 95.78B | 14.09B |
| Avg. Return | 5.79% | 29.04% |
| Div. Yield | 2.28% | 0.62% |
| Expense Ratio | 0.07% | 0.12% |
The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.
The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.
IEFA’s dividend yield is 1.66% higher than that of XLC (2.28% vs. 0.62%). Also, IEFA yielded on average 23.25% less per year over the past decade (5.79% vs. 29.04%). The expense ratio of IEFA is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%).
Fund Composition
Industry Exposure
| IEFA | XLC | |
| Technology | 9.81% | 0.0% |
| Industrials | 16.32% | 0.0% |
| Energy | 3.19% | 0.0% |
| Communication Services | 5.53% | 100.0% |
| Utilities | 3.25% | 0.0% |
| Healthcare | 12.01% | 0.0% |
| Consumer Defensive | 9.78% | 0.0% |
| Real Estate | 4.31% | 0.0% |
| Financial Services | 15.91% | 0.0% |
| Consumer Cyclical | 11.96% | 0.0% |
| Basic Materials | 7.93% | 0.0% |
The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.
IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.
The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services 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.
XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
IEFA is 16.32% more exposed to the Industrials sector than XLC (16.32% vs 0.0%). IEFA’s exposure to Financial Services and Healthcare stocks is 15.91% higher and 12.01% higher respectively (15.91% vs. 0.0% and 12.01% vs. 0.0%). In total, Utilities, Real Estate, and Communication Services also make up 86.91% less of the fund’s holdings compared to XLC (13.09% vs. 100.00%).
Holdings
| IEFA Holdings | Weight |
| Nestle SA | 1.77% |
| ASML Holding NV | 1.43% |
| Roche Holding AG | 1.31% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.08% |
| Novartis AG | 1.0% |
| Toyota Motor Corp | 0.92% |
| AstraZeneca PLC | 0.78% |
| Unilever PLC | 0.76% |
| AIA Group Ltd | 0.74% |
| SAP SE | 0.73% |
IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.
Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.
| XLC Holdings | Weight |
| Facebook Inc A | 23.75% |
| Alphabet Inc A | 11.49% |
| Alphabet Inc Class C | 11.16% |
| Netflix Inc | 4.78% |
| Charter Communications Inc A | 4.65% |
| Comcast Corp Class A | 4.44% |
| T-Mobile US Inc | 4.41% |
| The Walt Disney Co | 4.39% |
| AT&T Inc | 4.35% |
| Verizon Communications Inc | 4.33% |
XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.
Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.
Performance
Annual Returns
| Year | IEFA | XLC |
| 2020 | 8.55% | 26.85% |
| 2019 | 22.67% | 31.22% |
| 2018 | -14.2% | 0.0% |
| 2017 | 26.42% | 0.0% |
| 2016 | 1.36% | 0.0% |
| 2015 | 0.53% | 0.0% |
| 2014 | -4.82% | 0.0% |
| 2013 | 23.73% | 0.0% |
| 2012 | 0.0% | 0.0% |
| 2011 | 0.0% | 0.0% |
| 2010 | 0.0% | 0.0% |
IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% respectively.
The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IEFA | $10,000 | $13,315 | 5.79% |
| XLC | $10,000 | $16,645 | 29.04% |
A $10,000 investment in IEFA would have resulted in a final balance of $13,315. This is a profit of $3,315 over 2 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.
IEFA’s CAGR is 23.25 percentage points lower than that of XLC and as a result, would have yielded $3,330 less on a $10,000 investment. Thus, IEFA performed worse than XLC by 23.25% annually.
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