VEU vs. XLC: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VEU and XLC? And which fund is better?

The expense ratio of VEU is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than XLC over the past ten years.

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

Summary

VEU XLC
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Foreign Large Blend Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 53.64B 14.09B
Avg. Return 6.64% 29.04%
Div. Yield 2.31% 0.62%
Expense Ratio 0.08% 0.12%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

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%.

VEU’s dividend yield is 1.69% higher than that of XLC (2.31% vs. 0.62%). Also, VEU yielded on average 22.40% less per year over the past decade (6.64% vs. 29.04%). The expense ratio of VEU is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%).

Fund Composition

Industry Exposure

VEU vs. XLC - Industry Exposure

VEU XLC
Technology 12.94% 0.0%
Industrials 12.19% 0.0%
Energy 4.69% 0.0%
Communication Services 7.44% 100.0%
Utilities 2.89% 0.0%
Healthcare 9.34% 0.0%
Consumer Defensive 8.28% 0.0%
Real Estate 3.04% 0.0%
Financial Services 18.46% 0.0%
Consumer Cyclical 12.57% 0.0%
Basic Materials 8.17% 0.0%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VEU is 18.46% more exposed to the Financial Services sector than XLC (18.46% vs 0.0%). VEU’s exposure to Technology and Consumer Cyclical stocks is 12.94% higher and 12.57% higher respectively (12.94% vs. 0.0% and 12.57% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 84.83% less of the fund’s holdings compared to XLC (15.17% vs. 100.00%).

Holdings

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

XLC - Holdings

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

VEU XLC
Mean Return 0.56 0
R-squared 98.44 0
Std. Deviation 15.08 0
Alpha 0.28 0
Beta 0.99 0
Sharpe Ratio 0.4 0
Treynor Ratio 5.12 0

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Mean Return of 0.56 with a Beta of 0.99 and a Alpha of 0.28. Its Sharpe Ratio is 0.4 while VEU’s R-squared is 98.44. Furthermore, the fund has a Treynor Ratio of 5.12 and a Standard Deviation of 15.08.

The Communication Services Select Sector SPDR Fund (XLC) has a R-squared of 0 with a Standard Deviation of 0 and a Treynor Ratio of 0. Its Alpha is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a Beta of 0 and a Sharpe Ratio of 0.

VEU’s Mean Return is 0.56 points higher than that of XLC and its R-squared is 98.44 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than XLC. The Alpha and Beta of VEU are 0.28 points higher and 0.99 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

VEU vs. XLC - Annual Returns

Year VEU XLC
2020 11.39% 26.85%
2019 21.63% 31.22%
2018 -13.97% 0.0%
2017 27.27% 0.0%
2016 4.77% 0.0%
2015 -4.67% 0.0%
2014 -4.05% 0.0%
2013 14.5% 0.0%
2012 18.55% 0.0%
2011 -14.25% 0.0%
2010 11.85% 0.0%

VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% 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

VEU vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $13,548 6.64%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VEU would have resulted in a final balance of $13,548. This is a profit of $3,548 over 2 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

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%.

VEU’s CAGR is 22.40 percentage points lower than that of XLC and as a result, would have yielded $3,097 less on a $10,000 investment. Thus, VEU performed worse than XLC by 22.40% annually.


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