IEMG vs. XLE: What’s The Difference?

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

The expense ratio of IEMG is 0.01 percentage points lower than XLE’s (0.11% vs. 0.12%). IEMG also has a higher exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided higher returns than XLE over the past ten years.

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

Summary

IEMG XLE
Name iShares Core MSCI Emerging Markets ETF Energy Select Sector SPDR Fund
Category Diversified Emerging Mkts Equity Energy
Issuer iShares SPDR State Street Global Advisors
AUM 83.68B 25.55B
Avg. Return 7.41% 1.28%
Div. Yield 1.78% 3.92%
Expense Ratio 0.11% 0.12%

The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.

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%.

IEMG’s dividend yield is 2.14% lower than that of XLE (1.78% vs. 3.92%). Also, IEMG yielded on average 6.13% more per year over the past decade (7.41% vs. 1.28%). The expense ratio of IEMG is 0.01 percentage points lower than XLE’s (0.11% vs. 0.12%).

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Fund Composition

Industry Exposure

IEMG vs. XLE - Industry Exposure

IEMG XLE
Technology 20.44% 0.0%
Industrials 5.92% 0.0%
Energy 4.71% 100.0%
Communication Services 11.41% 0.0%
Utilities 2.13% 0.0%
Healthcare 5.73% 0.0%
Consumer Defensive 5.68% 0.0%
Real Estate 2.75% 0.0%
Financial Services 16.9% 0.0%
Consumer Cyclical 15.67% 0.0%
Basic Materials 8.64% 0.0%

The iShares Core MSCI Emerging Markets ETF (IEMG) has the most exposure to the Technology sector at 20.44%. This is followed by Financial Services and Consumer Cyclical at 16.9% and 15.67% respectively. Real Estate (2.75%), Energy (4.71%), and Consumer Defensive (5.68%) only make up 13.14% of the fund’s total assets.

IEMG’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.73%, 5.92%, 8.64%, 11.41%, and 15.67%.

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%.

IEMG is 20.44% more exposed to the Technology sector than XLE (20.44% vs 0.0%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 16.90% higher and 15.67% higher respectively (16.9% vs. 0.0% and 15.67% vs. 0.0%). In total, Real Estate, Energy, and Consumer Defensive also make up 86.86% less of the fund’s holdings compared to XLE (13.14% vs. 100.00%).

Holdings

IEMG - Holdings

IEMG Holdings Weight
Taiwan Semiconductor Manufacturing Co Ltd 5.37%
Tencent Holdings Ltd 4.42%
Alibaba Group Holding Ltd Ordinary Shares 4.38%
Samsung Electronics Co Ltd 3.49%
Meituan 1.52%
Naspers Ltd Class N 0.93%
Vale SA 0.91%
Reliance Industries Ltd Shs Dematerialised 0.83%
China Construction Bank Corp Class H 0.77%
Infosys Ltd 0.74%

IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.

Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.

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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Risk Analysis

IEMG XLE
Mean Return 0 0.32
R-squared 0 61.84
Std. Deviation 0 27.52
Alpha 0 -11.98
Beta 0 1.54
Sharpe Ratio 0 0.12
Treynor Ratio 0 -0.4

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Beta of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while IEMG’s Alpha is 0. Furthermore, the fund has a R-squared of 0 and a Mean Return of 0.

The Energy Select Sector SPDR Fund (XLE) has a Beta of 1.54 with a Treynor Ratio of -0.4 and a Sharpe Ratio of 0.12. Its Standard Deviation is 27.52 while XLE’s R-squared is 61.84. Furthermore, the fund has a Mean Return of 0.32 and a Alpha of -11.98.

IEMG’s Mean Return is 0.32 points lower than that of XLE and its R-squared is 61.84 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLE. The Alpha and Beta of IEMG are 11.98 points higher and 1.54 points lower than XLE’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. XLE - Annual Returns

Year IEMG XLE
2020 18.18% -32.56%
2019 17.5% 11.87%
2018 -14.69% -18.1%
2017 36.78% -1.01%
2016 9.98% 27.95%
2015 -13.86% -21.47%
2014 -2.04% -8.61%
2013 -2.16% 26.16%
2012 0.0% 5.17%
2011 0.0% 2.98%
2010 0.0% 21.7%

IEMG had its best year in 2017 with an annual return of 36.78%. IEMG’s worst year over the past decade yielded -14.69% and occurred in 2018. In most years the iShares Core MSCI Emerging Markets ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% 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

IEMG vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
XLE $10,000 $5,616 1.28%

A $10,000 investment in IEMG would have resulted in a final balance of $15,037. This is a profit of $5,037 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.41%.

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%.

IEMG’s CAGR is 6.13 percentage points higher than that of XLE and as a result, would have yielded $9,421 more on a $10,000 investment. Thus, IEMG outperformed XLE by 6.13% annually.


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