IEMG vs. XLI: What’s The Difference?

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

The expense ratio of IEMG is 0.01 percentage points lower than XLI’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 XLI over the past ten years.

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

Summary

IEMG XLI
Name iShares Core MSCI Emerging Markets ETF Industrial Select Sector SPDR Fund
Category Diversified Emerging Mkts Industrials
Issuer iShares SPDR State Street Global Advisors
AUM 83.68B 19.33B
Avg. Return 7.41% 14.44%
Div. Yield 1.78% 1.25%
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

IEMG’s dividend yield is 0.53% higher than that of XLI (1.78% vs. 1.25%). Also, IEMG yielded on average 7.04% less per year over the past decade (7.41% vs. 14.44%). The expense ratio of IEMG is 0.01 percentage points lower than XLI’s (0.11% vs. 0.12%).

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Fund Composition

Industry Exposure

IEMG vs. XLI - Industry Exposure

IEMG XLI
Technology 20.44% 1.82%
Industrials 5.92% 97.49%
Energy 4.71% 0.0%
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% 0.69%
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

IEMG is 18.62% more exposed to the Technology sector than XLI (20.44% vs 1.82%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 16.90% higher and 14.98% higher respectively (16.9% vs. 0.0% and 15.67% vs. 0.69%). In total, Real Estate, Energy, and Consumer Defensive also make up 13.14% more of the fund’s holdings compared to XLI (13.14% vs. 0.00%).

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%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

IEMG XLI
Mean Return 0 1.14
R-squared 0 78.97
Std. Deviation 0 17.13
Alpha 0 2.38
Beta 0 1.08
Sharpe Ratio 0 0.76
Treynor Ratio 0 11.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Treynor Ratio of 11.34 with a Alpha of 2.38 and a Mean Return of 1.14. Its Standard Deviation is 17.13 while XLI’s Sharpe Ratio is 0.76. Furthermore, the fund has a R-squared of 78.97 and a Beta of 1.08.

IEMG’s Mean Return is 1.14 points lower than that of XLI and its R-squared is 78.97 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLI. The Alpha and Beta of IEMG are 2.38 points lower and 1.08 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. XLI - Annual Returns

Year IEMG XLI
2020 18.18% 11.0%
2019 17.5% 29.11%
2018 -14.69% -13.1%
2017 36.78% 23.85%
2016 9.98% 19.93%
2015 -13.86% -4.27%
2014 -2.04% 10.44%
2013 -2.16% 40.44%
2012 0.0% 14.86%
2011 0.0% -1.01%
2010 0.0% 27.62%

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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

IEMG vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
XLI $10,000 $19,556 14.44%

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 XLI, the end total would have been $19,556. This equates to a $9,556 profit over 7 years and a compound annual growth rate (CAGR) of 14.44%.

IEMG’s CAGR is 7.04 percentage points lower than that of XLI and as a result, would have yielded $4,519 less on a $10,000 investment. Thus, IEMG performed worse than XLI by 7.04% annually.


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