The iShares Core MSCI Emerging Markets ETF (IEMG) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between IEMG and XLY? And which fund is better?
The expense ratio of IEMG is 0.01 percentage points lower than XLY’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 XLY over the past ten years.
In this article, we’ll compare IEMG vs. XLY. We’ll look at industry exposure and holdings, as well as at their portfolio growth and performance. Moreover, I’ll also discuss IEMG’s and XLY’s annual returns, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||Consumer Discretionary Select Sector SPDR Fund|
|Category||Diversified Emerging Mkts||Consumer Cyclical|
|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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
IEMG’s dividend yield is 1.15% higher than that of XLY (1.78% vs. 0.63%). Also, IEMG yielded on average 11.46% less per year over the past decade (7.41% vs. 18.86%). The expense ratio of IEMG is 0.01 percentage points lower than XLY’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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
IEMG is 19.87% more exposed to the Technology sector than XLY (20.44% vs 0.57%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 16.90% higher and 78.43% lower respectively (16.9% vs. 0.0% and 15.67% vs. 94.1%). In total, Real Estate, Energy, and Consumer Defensive also make up 7.80% more of the fund’s holdings compared to XLY (13.14% vs. 5.34%).
|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%.
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
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The iShares Core MSCI Emerging Markets ETF (IEMG) has a Mean Return of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Standard Deviation is 0 while IEMG’s Beta is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Standard Deviation of 15.97 with a Mean Return of 1.47 and a Sharpe Ratio of 1.06. Its Alpha is 6.96 while XLY’s R-squared is 80.84. Furthermore, the fund has a Beta of 1.02 and a Treynor Ratio of 16.69.
IEMG’s Mean Return is 1.47 points lower than that of XLY and its R-squared is 80.84 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLY. The Alpha and Beta of IEMG are 6.96 points lower and 1.02 points lower than XLY’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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% 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 XLY, the end total would have been $26,483. This equates to a $16,483 profit over 7 years and a compound annual growth rate (CAGR) of 18.86%.
IEMG’s CAGR is 11.46 percentage points lower than that of XLY and as a result, would have yielded $11,446 less on a $10,000 investment. Thus, IEMG performed worse than XLY by 11.46% annually.
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