The Energy Select Sector SPDR Fund (XLE) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and TLT is a iShares Long Government fund. So, what’s the difference between XLE and TLT? And which fund is better?

The expense ratio of XLE is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%). XLE also has a high exposure to the energy sector while TLT is mostly comprised of AAA bonds. Overall, XLE has provided lower returns than TLT over the past 11 years.

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

Summary

XLETLT
NameEnergy Select Sector SPDR FundiShares 20+ Year Treasury Bond ETF
CategoryEquity EnergyLong Government
IssuerSPDR State Street Global AdvisorsiShares
AUM25.55B15.15B
Avg. Return1.28%9.00%
Div. Yield3.92%1.5%
Expense Ratio0.12%0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

XLE’s dividend yield is 2.42% higher than that of TLT (3.92% vs. 1.5%). Also, XLE yielded on average 7.72% less per year over the past decade (1.28% vs. 9.00%). The expense ratio of XLE is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%).

Fund Composition

Holdings

XLE - Holdings

XLE HoldingsWeight
Exxon Mobil Corp23.7%
Chevron Corp20.03%
ConocoPhillips4.64%
EOG Resources Inc4.46%
Schlumberger Ltd4.43%
Marathon Petroleum Corp4.17%
Pioneer Natural Resources Co4.08%
Phillips 664.07%
Kinder Morgan Inc Class P3.85%
Williams Companies Inc3.5%

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%.

TLT - Holdings

TLT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

XLETLT
Mean Return0.320.63
R-squared61.8468.76
Std. Deviation27.5212.76
Alpha-11.98-2.83
Beta1.543.54
Sharpe Ratio0.120.55
Treynor Ratio-0.41.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Alpha of -2.83 with a Treynor Ratio of 1.82 and a Beta of 3.54. Its Sharpe Ratio is 0.55 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a R-squared of 68.76 and a Mean Return of 0.63.

XLE’s Mean Return is 0.31 points lower than that of TLT and its R-squared is 6.92 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than TLT. The Alpha and Beta of XLE are 9.15 points lower and 2.00 points lower than TLT’s Alpha and Beta.

Performance

Annual Returns

XLE vs. TLT - Annual Returns

YearXLETLT
2020-32.56%17.92%
201911.87%14.93%
2018-18.1%-2.07%
2017-1.01%8.92%
201627.95%1.36%
2015-21.47%-1.65%
2014-8.61%27.35%
201326.16%-13.91%
20125.17%3.25%
20112.98%33.6%
201021.7%9.25%

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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

XLE vs. TLT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLE$10,000$9,3391.28%
TLT$10,000$23,8099.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

XLE’s CAGR is 7.72 percentage points lower than that of TLT and as a result, would have yielded $14,470 less on a $10,000 investment. Thus, XLE performed worse than TLT by 7.72% annually.

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