IEFA vs. XLE: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Energy Select Sector SPDR Fund (XLE) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and XLE is a SPDR State Street Global Advisors Equity Energy fund. So, what’s the difference between IEFA and XLE? And which fund is better?

The expense ratio of IEFA is 0.05 percentage points lower than XLE’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 higher returns than XLE over the past ten years.

In this article, we’ll compare IEFA vs. XLE. We’ll look at performance and fund composition, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss IEFA’s and XLE’s risk metrics, annual returns, and industry exposure and examine how these affect their overall returns.

Summary

IEFA XLE
Name iShares Core MSCI EAFE ETF Energy Select Sector SPDR Fund
Category Foreign Large Blend Equity Energy
Issuer iShares SPDR State Street Global Advisors
AUM 95.78B 25.55B
Avg. Return 5.79% 1.28%
Div. Yield 2.28% 3.92%
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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

IEFA’s dividend yield is 1.64% lower than that of XLE (2.28% vs. 3.92%). Also, IEFA yielded on average 4.51% more per year over the past decade (5.79% vs. 1.28%). The expense ratio of IEFA is 0.05 percentage points lower than XLE’s (0.07% vs. 0.12%).

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Fund Composition

Industry Exposure

IEFA vs. XLE - Industry Exposure

IEFA XLE
Technology 9.81% 0.0%
Industrials 16.32% 0.0%
Energy 3.19% 100.0%
Communication Services 5.53% 0.0%
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 Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, 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 XLE (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 13.09% more of the fund’s holdings compared to XLE (13.09% vs. 0.00%).

Holdings

IEFA - 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%.

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

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Performance

Annual Returns

IEFA vs. XLE - Annual Returns

Year IEFA XLE
2020 8.55% -32.56%
2019 22.67% 11.87%
2018 -14.2% -18.1%
2017 26.42% -1.01%
2016 1.36% 27.95%
2015 0.53% -21.47%
2014 -4.82% -8.61%
2013 23.73% 26.16%
2012 0.0% 5.17%
2011 0.0% 2.98%
2010 0.0% 21.7%

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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

IEFA vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
XLE $10,000 $5,616 1.28%

A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in XLE, the end total would have been $5,616. This equates to a $-4,384 profit over 7 years and a compound annual growth rate (CAGR) of 1.28%.

IEFA’s CAGR is 4.51 percentage points higher than that of XLE and as a result, would have yielded $8,392 more on a $10,000 investment. Thus, IEFA outperformed XLE by 4.51% annually.


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