The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between IGSB and XLC? And which fund is better?
The expense ratio of IGSB is 0.06 percentage points lower than XLC’s (0.06% vs. 0.12%). IGSB is mostly comprised of BBB bonds while XLC has a high exposure to the communication services sector. Overall, IGSB has provided lower returns than XLC over the past 2 years.
In this article, we’ll compare IGSB vs. XLC. We’ll look at annual returns and performance, as well as at their holdings and risk metrics. Moreover, I’ll also discuss IGSB’s and XLC’s industry exposure, portfolio growth, and fund composition and examine how these affect their overall returns.
Summary
| IGSB | XLC | |
| Name | iShares 1-5 Year Investment Grade Corporate Bond ETF | Communication Services Select Sector SPDR Fund |
| Category | Short-Term Bond | Communications |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 26.63B | 14.09B |
| Avg. Return | 2.51% | 29.04% |
| Div. Yield | 2.02% | 0.62% |
| Expense Ratio | 0.06% | 0.12% |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.
IGSB’s dividend yield is 1.40% higher than that of XLC (2.02% vs. 0.62%). Also, IGSB yielded on average 26.53% less per year over the past decade (2.51% vs. 29.04%). The expense ratio of IGSB is 0.06 percentage points lower than XLC’s (0.06% vs. 0.12%).
Fund Composition
Holdings
| IGSB Bond Sectors | Weight |
| BBB | 50.48% |
| A | 40.04% |
| AA | 7.46% |
| AAA | 2.21% |
| BB | 0.09% |
| Below B | 0.0% |
| B | 0.0% |
| US Government | 0.0% |
| Others | -0.28% |
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
| XLC Holdings | Weight |
| Facebook Inc A | 23.75% |
| Alphabet Inc A | 11.49% |
| Alphabet Inc Class C | 11.16% |
| Netflix Inc | 4.78% |
| Charter Communications Inc A | 4.65% |
| Comcast Corp Class A | 4.44% |
| T-Mobile US Inc | 4.41% |
| The Walt Disney Co | 4.39% |
| AT&T Inc | 4.35% |
| Verizon Communications Inc | 4.33% |
XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.
Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.
Risk Analysis
| IGSB | XLC | |
| Mean Return | 0.19 | 0 |
| R-squared | 26.13 | 0 |
| Std. Deviation | 2 | 0 |
| Alpha | 0.69 | 0 |
| Beta | 0.34 | 0 |
| Sharpe Ratio | 0.82 | 0 |
| Treynor Ratio | 4.82 | 0 |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Beta of 0.34 with a Treynor Ratio of 4.82 and a R-squared of 26.13. Its Sharpe Ratio is 0.82 while IGSB’s Alpha is 0.69. Furthermore, the fund has a Mean Return of 0.19 and a Standard Deviation of 2.
The Communication Services Select Sector SPDR Fund (XLC) has a Alpha of 0 with a Mean Return of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while XLC’s Standard Deviation is 0. Furthermore, the fund has a R-squared of 0 and a Beta of 0.
IGSB’s Mean Return is 0.19 points higher than that of XLC and its R-squared is 26.13 points higher. With a Standard Deviation of 2, IGSB is slightly more volatile than XLC. The Alpha and Beta of IGSB are 0.69 points higher and 0.34 points higher than XLC’s Alpha and Beta.
Performance
Annual Returns
| Year | IGSB | XLC |
| 2020 | 5.26% | 26.85% |
| 2019 | 7.01% | 31.22% |
| 2018 | 1.34% | 0.0% |
| 2017 | 1.41% | 0.0% |
| 2016 | 1.77% | 0.0% |
| 2015 | 0.7% | 0.0% |
| 2014 | 0.74% | 0.0% |
| 2013 | 1.03% | 0.0% |
| 2012 | 3.28% | 0.0% |
| 2011 | 1.34% | 0.0% |
| 2010 | 3.69% | 0.0% |
IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% respectively.
The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IGSB | $10,000 | $11,263 | 2.51% |
| XLC | $10,000 | $16,645 | 29.04% |
A $10,000 investment in IGSB would have resulted in a final balance of $11,263. This is a profit of $1,263 over 2 years and amounts to a compound annual growth rate (CAGR) of 2.51%.
With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.
IGSB’s CAGR is 26.53 percentage points lower than that of XLC and as a result, would have yielded $5,382 less on a $10,000 investment. Thus, IGSB performed worse than XLC by 26.53% annually.
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