VEU vs. XLV: What’s The Difference?

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

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

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

Summary

VEU XLV
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares Health Care Select Sector SPDR Fund
Category Foreign Large Blend Health
Issuer Vanguard SPDR State Street Global Advisors
AUM 53.64B 27.88B
Avg. Return 6.64% 15.02%
Div. Yield 2.31% 1.4%
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

VEU’s dividend yield is 0.91% higher than that of XLV (2.31% vs. 1.4%). Also, VEU yielded on average 8.39% less per year over the past decade (6.64% vs. 15.02%). The expense ratio of VEU is 0.04 percentage points lower than XLV’s (0.08% vs. 0.12%).

Fund Composition

Industry Exposure

VEU vs. XLV - Industry Exposure

VEU XLV
Technology 12.94% 0.0%
Industrials 12.19% 0.0%
Energy 4.69% 0.0%
Communication Services 7.44% 0.0%
Utilities 2.89% 0.0%
Healthcare 9.34% 100.0%
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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, 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 XLV (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 15.17% more of the fund’s holdings compared to XLV (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%.

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

Risk Analysis

VEU XLV
Mean Return 0.56 1.27
R-squared 98.44 58.19
Std. Deviation 15.08 12.94
Alpha 0.28 7.75
Beta 0.99 0.7
Sharpe Ratio 0.4 1.13
Treynor Ratio 5.12 21.1

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

The Health Care Select Sector SPDR Fund (XLV) has a Alpha of 7.75 with a Beta of 0.7 and a Treynor Ratio of 21.1. Its R-squared is 58.19 while XLV’s Sharpe Ratio is 1.13. Furthermore, the fund has a Mean Return of 1.27 and a Standard Deviation of 12.94.

VEU’s Mean Return is 0.71 points lower than that of XLV and its R-squared is 40.25 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than XLV. The Alpha and Beta of VEU are 7.47 points lower and 0.29 points higher than XLV’s Alpha and Beta.

Performance

Annual Returns

VEU vs. XLV - Annual Returns

Year VEU XLV
2020 11.39% 13.33%
2019 21.63% 20.63%
2018 -13.97% 6.3%
2017 27.27% 21.7%
2016 4.77% -2.83%
2015 -4.67% 6.82%
2014 -4.05% 25.17%
2013 14.5% 41.24%
2012 18.55% 17.56%
2011 -14.25% 12.44%
2010 11.85% 2.91%

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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

VEU vs. XLV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
XLV $10,000 $44,147 15.02%

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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

VEU’s CAGR is 8.39 percentage points lower than that of XLV and as a result, would have yielded $25,640 less on a $10,000 investment. Thus, VEU performed worse than XLV by 8.39% annually.


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