The iShares Core MSCI Emerging Markets ETF (IEMG) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between IEMG and XLF? And which fund is better?
The expense ratio of IEMG is 0.01 percentage points lower than XLF’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 lower returns than XLF over the past ten years.
In this article, we’ll compare IEMG vs. XLF. We’ll look at performance and annual returns, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss IEMG’s and XLF’s fund composition, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||Financial Select Sector SPDR Fund|
|Category||Diversified Emerging Mkts||Financial|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
IEMG’s dividend yield is 0.21% higher than that of XLF (1.78% vs. 1.57%). Also, IEMG yielded on average 4.76% less per year over the past decade (7.41% vs. 12.17%). The expense ratio of IEMG is 0.01 percentage points lower than XLF’s (0.11% vs. 0.12%).
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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 Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, 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 XLF (20.44% vs 0.0%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 83.10% lower and 15.67% higher respectively (16.9% vs. 100.0% and 15.67% vs. 0.0%). In total, Real Estate, Energy, and Consumer Defensive also make up 13.14% more of the fund’s holdings compared to XLF (13.14% vs. 0.00%).
|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%|
|Naspers Ltd Class N||0.93%|
|Reliance Industries Ltd Shs Dematerialised||0.83%|
|China Construction Bank Corp Class H||0.77%|
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%.
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
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The iShares Core MSCI Emerging Markets ETF (IEMG) has a Treynor Ratio of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Alpha is 0 while IEMG’s Standard Deviation is 0. Furthermore, the fund has a Beta of 0 and a Mean Return of 0.
The Financial Select Sector SPDR Fund (XLF) has a Mean Return of 1.21 with a Beta of 1.15 and a Standard Deviation of 18.86. Its Treynor Ratio is 11.25 while XLF’s Sharpe Ratio is 0.74. Furthermore, the fund has a Alpha of 2.63 and a R-squared of 73.26.
IEMG’s Mean Return is 1.21 points lower than that of XLF and its R-squared is 73.26 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLF. The Alpha and Beta of IEMG are 2.63 points lower and 1.15 points lower than XLF’s Alpha and Beta.
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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 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLF, the end total would have been $19,073. This equates to a $9,073 profit over 7 years and a compound annual growth rate (CAGR) of 12.17%.
IEMG’s CAGR is 4.76 percentage points lower than that of XLF and as a result, would have yielded $4,036 less on a $10,000 investment. Thus, IEMG performed worse than XLF by 4.76% annually.
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