IGSB vs. XLI: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between IGSB and XLI? And which fund is better?

The expense ratio of IGSB is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%). IGSB is mostly comprised of BBB bonds while XLI has a high exposure to the industrials sector. Overall, IGSB has provided lower returns than XLI over the past 11 years.

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

Summary

IGSB XLI
Name iShares 1-5 Year Investment Grade Corporate Bond ETF Industrial Select Sector SPDR Fund
Category Short-Term Bond Industrials
Issuer iShares SPDR State Street Global Advisors
AUM 26.63B 19.33B
Avg. Return 2.51% 14.44%
Div. Yield 2.02% 1.25%
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 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%.

IGSB’s dividend yield is 0.77% higher than that of XLI (2.02% vs. 1.25%). Also, IGSB yielded on average 11.94% less per year over the past decade (2.51% vs. 14.44%). The expense ratio of IGSB is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%).

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Fund Composition

Holdings

IGSB - 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.

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

IGSB XLI
Mean Return 0.19 1.14
R-squared 26.13 78.97
Std. Deviation 2 17.13
Alpha 0.69 2.38
Beta 0.34 1.08
Sharpe Ratio 0.82 0.76
Treynor Ratio 4.82 11.34

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a R-squared of 26.13 with a Sharpe Ratio of 0.82 and a Standard Deviation of 2. Its Alpha is 0.69 while IGSB’s Beta is 0.34. Furthermore, the fund has a Mean Return of 0.19 and a Treynor Ratio of 4.82.

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

IGSB’s Mean Return is 0.95 points lower than that of XLI and its R-squared is 52.84 points lower. With a Standard Deviation of 2, IGSB is slightly less volatile than XLI. The Alpha and Beta of IGSB are 1.69 points lower and 0.74 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

IGSB vs. XLI - Annual Returns

Year IGSB XLI
2020 5.26% 11.0%
2019 7.01% 29.11%
2018 1.34% -13.1%
2017 1.41% 23.85%
2016 1.77% 19.93%
2015 0.7% -4.27%
2014 0.74% 10.44%
2013 1.03% 40.44%
2012 3.28% 14.86%
2011 1.34% -1.01%
2010 3.69% 27.62%

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 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

IGSB vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IGSB $10,000 $13,103 2.51%
XLI $10,000 $39,853 14.44%

A $10,000 investment in IGSB would have resulted in a final balance of $13,103. This is a profit of $3,103 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.51%.

With a $10,000 investment in XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

IGSB’s CAGR is 11.94 percentage points lower than that of XLI and as a result, would have yielded $26,750 less on a $10,000 investment. Thus, IGSB performed worse than XLI by 11.94% annually.


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