VEU vs. XLI: What’s The Difference?

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

The expense ratio of VEU is 0.04 percentage points lower than XLI’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 lower returns than XLI over the past ten years.

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

Summary

VEU XLI
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares Industrial Select Sector SPDR Fund
Category Foreign Large Blend Industrials
Issuer Vanguard SPDR State Street Global Advisors
AUM 53.64B 19.33B
Avg. Return 6.64% 14.44%
Div. Yield 2.31% 1.25%
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 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%.

VEU’s dividend yield is 1.06% higher than that of XLI (2.31% vs. 1.25%). Also, VEU yielded on average 7.80% less per year over the past decade (6.64% vs. 14.44%). The expense ratio of VEU is 0.04 percentage points lower than XLI’s (0.08% vs. 0.12%).

Fund Composition

Industry Exposure

VEU vs. XLI - Industry Exposure

VEU XLI
Technology 12.94% 1.82%
Industrials 12.19% 97.49%
Energy 4.69% 0.0%
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% 0.69%
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 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%.

VEU is 18.46% more exposed to the Financial Services sector than XLI (18.46% vs 0.0%). VEU’s exposure to Technology and Consumer Cyclical stocks is 11.12% higher and 11.88% higher respectively (12.94% vs. 1.82% and 12.57% vs. 0.69%). In total, Real Estate, Energy, and Communication Services also make up 15.17% more of the fund’s holdings compared to XLI (15.17% vs. 0.00%).

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%.

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%.

Risk Analysis

VEU XLI
Mean Return 0.56 1.14
R-squared 98.44 78.97
Std. Deviation 15.08 17.13
Alpha 0.28 2.38
Beta 0.99 1.08
Sharpe Ratio 0.4 0.76
Treynor Ratio 5.12 11.34

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

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

VEU’s Mean Return is 0.58 points lower than that of XLI and its R-squared is 19.47 points higher. With a Standard Deviation of 15.08, VEU is slightly less volatile than XLI. The Alpha and Beta of VEU are 2.10 points lower and 0.09 points lower than XLI’s Alpha and Beta.

Performance

Annual Returns

VEU vs. XLI - Annual Returns

Year VEU XLI
2020 11.39% 11.0%
2019 21.63% 29.11%
2018 -13.97% -13.1%
2017 27.27% 23.85%
2016 4.77% 19.93%
2015 -4.67% -4.27%
2014 -4.05% 10.44%
2013 14.5% 40.44%
2012 18.55% 14.86%
2011 -14.25% -1.01%
2010 11.85% 27.62%

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 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

VEU vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
XLI $10,000 $39,853 14.44%

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 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%.

VEU’s CAGR is 7.80 percentage points lower than that of XLI and as a result, would have yielded $21,346 less on a $10,000 investment. Thus, VEU performed worse than XLI by 7.80% annually.


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