XLE vs. ACWI: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and ACWI is a iShares N/A fund. So, what’s the difference between XLE and ACWI? And which fund is better?

The expense ratio of XLE is 0.20 percentage points lower than ACWI’s (0.12% vs. 0.32%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than ACWI over the past 11 years.

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

Summary

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%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

Fund Composition

Industry Exposure

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%.

The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.

ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.

Holdings

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%.

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

Risk Analysis

The Energy Select Sector SPDR Fund (XLE) has a Mean Return of 0.32 with a Sharpe Ratio of 0.12 and a Standard Deviation of 27.52. Its Beta is 1.54 while XLE’s R-squared is 61.84. Furthermore, the fund has a Alpha of -11.98 and a Treynor Ratio of -0.4.

The iShares MSCI ACWI ETF (ACWI) has a Standard Deviation of 14.05 with a Sharpe Ratio of 0.71 and a Alpha of 0.15. Its Treynor Ratio is 9.45 while ACWI’s R-squared is 99.96. Furthermore, the fund has a Beta of 1 and a Mean Return of 0.89.

Performance

Annual Returns

XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.

With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.