The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Energy Select Sector SPDR Fund (XLE) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and XLE is a SPDR State Street Global Advisors Equity Energy fund. So, what’s the difference between VEU and XLE? And which fund is better?
The expense ratio of VEU is 0.04 percentage points lower than XLE’s (0.08% vs. 0.12%). VEU also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VEU has provided higher returns than XLE over the past ten years.
In this article, we’ll compare VEU vs. XLE. We’ll look at industry exposure and portfolio growth, as well as at their performance and risk metrics. Moreover, I’ll also discuss VEU’s and XLE’s holdings, fund composition, and annual returns and examine how these affect their overall returns.
Summary
| VEU | XLE | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | Energy Select Sector SPDR Fund |
| Category | Foreign Large Blend | Equity Energy |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 53.64B | 25.55B |
| Avg. Return | 6.64% | 1.28% |
| Div. Yield | 2.31% | 3.92% |
| 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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.
VEU’s dividend yield is 1.61% lower than that of XLE (2.31% vs. 3.92%). Also, VEU yielded on average 5.36% more per year over the past decade (6.64% vs. 1.28%). The expense ratio of VEU is 0.04 percentage points lower than XLE’s (0.08% vs. 0.12%).
Fund Composition
Industry Exposure
| VEU | XLE | |
| Technology | 12.94% | 0.0% |
| Industrials | 12.19% | 0.0% |
| Energy | 4.69% | 100.0% |
| Communication Services | 7.44% | 0.0% |
| 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 Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.
XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, 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 XLE (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 XLE (15.17% vs. 100.00%).
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%.
| XLE Holdings | Weight |
| Exxon Mobil Corp | 23.7% |
| Chevron Corp | 20.03% |
| ConocoPhillips | 4.64% |
| EOG Resources Inc | 4.46% |
| Schlumberger Ltd | 4.43% |
| Marathon Petroleum Corp | 4.17% |
| Pioneer Natural Resources Co | 4.08% |
| Phillips 66 | 4.07% |
| Kinder Morgan Inc Class P | 3.85% |
| Williams Companies Inc | 3.5% |
XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.
Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.
Risk Analysis
| VEU | XLE | |
| Mean Return | 0.56 | 0.32 |
| R-squared | 98.44 | 61.84 |
| Std. Deviation | 15.08 | 27.52 |
| Alpha | 0.28 | -11.98 |
| Beta | 0.99 | 1.54 |
| Sharpe Ratio | 0.4 | 0.12 |
| Treynor Ratio | 5.12 | -0.4 |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Standard Deviation of 15.08 with a Treynor Ratio of 5.12 and a Beta of 0.99. Its Alpha is 0.28 while VEU’s R-squared is 98.44. Furthermore, the fund has a Mean Return of 0.56 and a Sharpe Ratio of 0.4.
The Energy Select Sector SPDR Fund (XLE) has a R-squared of 61.84 with a Mean Return of 0.32 and a Beta of 1.54. Its Alpha is -11.98 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Treynor Ratio of -0.4 and a Standard Deviation of 27.52.
VEU’s Mean Return is 0.24 points higher than that of XLE and its R-squared is 36.60 points higher. With a Standard Deviation of 15.08, VEU is slightly less volatile than XLE. The Alpha and Beta of VEU are 12.26 points higher and 0.55 points lower than XLE’s Alpha and Beta.
Performance
Annual Returns
| Year | VEU | XLE |
| 2020 | 11.39% | -32.56% |
| 2019 | 21.63% | 11.87% |
| 2018 | -13.97% | -18.1% |
| 2017 | 27.27% | -1.01% |
| 2016 | 4.77% | 27.95% |
| 2015 | -4.67% | -21.47% |
| 2014 | -4.05% | -8.61% |
| 2013 | 14.5% | 26.16% |
| 2012 | 18.55% | 5.17% |
| 2011 | -14.25% | 2.98% |
| 2010 | 11.85% | 21.7% |
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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEU | $10,000 | $18,507 | 6.64% |
| XLE | $10,000 | $9,339 | 1.28% |
A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
With a $10,000 investment in XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.
VEU’s CAGR is 5.36 percentage points higher than that of XLE and as a result, would have yielded $9,168 more on a $10,000 investment. Thus, VEU outperformed XLE by 5.36% annually.
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