USMV vs. XLI: What’s The Difference?

The iShares MSCI USA Min Vol Factor ETF (USMV) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between USMV and XLI? And which fund is better?

The expense ratio of USMV is 0.03 percentage points higher than XLI’s (0.15% vs. 0.12%). USMV also has a higher exposure to the technology sector and a lower standard deviation. Overall, USMV has provided lower returns than XLI over the past 8 years.

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

Summary

USMV XLI
Name iShares MSCI USA Min Vol Factor ETF Industrial Select Sector SPDR Fund
Category Large Blend Industrials
Issuer iShares SPDR State Street Global Advisors
AUM 27.6B 19.33B
Avg. Return 13.89% 14.44%
Div. Yield 1.5% 1.25%
Expense Ratio 0.15% 0.12%

The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

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%.

USMV’s dividend yield is 0.25% higher than that of XLI (1.5% vs. 1.25%). Also, USMV yielded on average 0.55% less per year over the past decade (13.89% vs. 14.44%). The expense ratio of USMV is 0.03 percentage points higher than XLI’s (0.15% vs. 0.12%).

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Fund Composition

Industry Exposure

USMV vs. XLI - Industry Exposure

USMV XLI
Technology 20.53% 1.82%
Industrials 10.51% 97.49%
Energy 0.21% 0.0%
Communication Services 11.03% 0.0%
Utilities 6.93% 0.0%
Healthcare 18.42% 0.0%
Consumer Defensive 12.82% 0.0%
Real Estate 2.73% 0.0%
Financial Services 9.65% 0.0%
Consumer Cyclical 5.53% 0.69%
Basic Materials 1.65% 0.0%

The iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

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%.

USMV is 18.71% more exposed to the Technology sector than XLI (20.53% vs 1.82%). USMV’s exposure to Healthcare and Consumer Defensive stocks is 18.42% higher and 12.82% higher respectively (18.42% vs. 0.0% and 12.82% vs. 0.0%). In total, Basic Materials, Real Estate, and Consumer Cyclical also make up 9.22% more of the fund’s holdings compared to XLI (9.91% vs. 0.69%).

Holdings

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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

USMV 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 MSCI USA Min Vol Factor ETF (USMV) has a R-squared of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Sharpe Ratio is 0 while USMV’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.

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 Treynor Ratio is 11.34 while XLI’s Sharpe Ratio is 0.76. Furthermore, the fund has a Standard Deviation of 17.13 and a Beta of 1.08.

USMV’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, USMV is slightly less volatile than XLI. The Alpha and Beta of USMV are 2.38 points lower and 1.08 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

USMV vs. XLI - Annual Returns

Year USMV XLI
2020 5.6% 11.0%
2019 27.77% 29.11%
2018 1.36% -13.1%
2017 18.97% 23.85%
2016 10.5% 19.93%
2015 5.5% -4.27%
2014 16.34% 10.44%
2013 25.11% 40.44%
2012 11.04% 14.86%
2011 0.0% -1.01%
2010 0.0% 27.62%

USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% 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

USMV vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
USMV $10,000 $27,607 13.89%
XLI $10,000 $27,465 14.44%

A $10,000 investment in USMV would have resulted in a final balance of $27,607. This is a profit of $17,607 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.89%.

With a $10,000 investment in XLI, the end total would have been $27,465. This equates to a $17,465 profit over 8 years and a compound annual growth rate (CAGR) of 14.44%.

USMV’s CAGR is 0.55 percentage points lower than that of XLI and as a result, would have yielded $142 more on a $10,000 investment. Thus, USMV performed worse than XLI by 0.55% annually.


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