The Energy Select Sector SPDR Fund (XLE) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between XLE and EMB? And which fund is better?
The expense ratio of XLE is 0.27 percentage points lower than EMB’s (0.12% vs. 0.39%). XLE also has a high exposure to the energy sector while EMB is mostly comprised of BBB bonds. Overall, XLE has provided lower returns than EMB over the past 11 years.
In this article, we’ll compare XLE vs. EMB. We’ll look at risk metrics and industry exposure, as well as at their annual returns and performance. Moreover, I’ll also discuss XLE’s and EMB’s fund composition, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Equity Energy||Emerging Markets Bond|
|Issuer||SPDR State Street Global Advisors||iShares|
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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
XLE’s dividend yield is 0.07% higher than that of EMB (3.92% vs. 3.85%). Also, XLE yielded on average 5.15% less per year over the past decade (1.28% vs. 6.43%). The expense ratio of XLE is 0.27 percentage points lower than EMB’s (0.12% vs. 0.39%).
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|Exxon Mobil Corp||23.7%|
|EOG Resources Inc||4.46%|
|Marathon Petroleum Corp||4.17%|
|Pioneer Natural Resources Co||4.08%|
|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%.
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
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The Energy Select Sector SPDR Fund (XLE) has a Mean Return of 0.32 with a Alpha of -11.98 and a Sharpe Ratio of 0.12. Its Treynor Ratio is -0.4 while XLE’s Standard Deviation is 27.52. Furthermore, the fund has a Beta of 1.54 and a R-squared of 61.84.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Mean Return of 0.44 with a Beta of 1.36 and a Alpha of 0.89. Its Sharpe Ratio is 0.55 while EMB’s R-squared is 23.34. Furthermore, the fund has a Treynor Ratio of 3.24 and a Standard Deviation of 8.44.
XLE’s Mean Return is 0.12 points lower than that of EMB and its R-squared is 38.50 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than EMB. The Alpha and Beta of XLE are 12.87 points lower and 0.18 points higher than EMB’s Alpha and Beta.
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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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
XLE’s CAGR is 5.15 percentage points lower than that of EMB and as a result, would have yielded $9,956 less on a $10,000 investment. Thus, XLE performed worse than EMB by 5.15% annually.
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