XLF vs. ACWI: What’s The Difference?

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

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

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

Summary

XLF ACWI
Name Financial Select Sector SPDR Fund iShares MSCI ACWI ETF
Category Financial N/A
Issuer SPDR State Street Global Advisors iShares
AUM 40.81B 16.85B
Avg. Return 12.17% 10.21%
Div. Yield 1.57% 1.39%
Expense Ratio 0.12% 0.32%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% 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%.

XLF’s dividend yield is 0.18% higher than that of ACWI (1.57% vs. 1.39%). Also, XLF yielded on average 1.95% more per year over the past decade (12.17% vs. 10.21%). The expense ratio of XLF is 0.20 percentage points lower than ACWI’s (0.12% vs. 0.32%).

Fund Composition

Industry Exposure

XLF vs. ACWI - Industry Exposure

XLF ACWI
Technology 0.0% 20.41%
Industrials 0.0% 9.65%
Energy 0.0% 3.48%
Communication Services 0.0% 9.87%
Utilities 0.0% 2.61%
Healthcare 0.0% 11.74%
Consumer Defensive 0.0% 7.15%
Real Estate 0.0% 2.75%
Financial Services 100.0% 15.58%
Consumer Cyclical 0.0% 12.01%
Basic Materials 0.0% 4.73%

The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, 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%.

XLF is 84.42% more exposed to the Financial Services sector than ACWI (100.0% vs 15.58%). XLF’s exposure to Technology and Industrials stocks is 20.41% lower and 9.65% lower respectively (0.0% vs. 20.41% and 0.0% vs. 9.65%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.91% less of the fund’s holdings compared to ACWI (0.00% vs. 21.91%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
Charles Schwab Corp 2.66%
American Express Co 2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

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

XLF ACWI
Mean Return 1.21 0.89
R-squared 73.26 99.96
Std. Deviation 18.86 14.05
Alpha 2.63 0.15
Beta 1.15 1
Sharpe Ratio 0.74 0.71
Treynor Ratio 11.25 9.45

The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a Treynor Ratio of 11.25 and a Standard Deviation of 18.86. Its Alpha is 2.63 while XLF’s R-squared is 73.26. Furthermore, the fund has a Beta of 1.15 and a Mean Return of 1.21.

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

XLF’s Mean Return is 0.32 points higher than that of ACWI and its R-squared is 26.70 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than ACWI. The Alpha and Beta of XLF are 2.48 points higher and 0.15 points higher than ACWI’s Alpha and Beta.

Performance

Annual Returns

XLF vs. ACWI - Annual Returns

Year XLF ACWI
2020 -1.68% 16.38%
2019 31.88% 26.7%
2018 -13.09% -9.15%
2017 22.03% 24.35%
2016 22.55% 8.22%
2015 -1.6% -2.39%
2014 15.02% 4.64%
2013 35.37% 22.91%
2012 28.53% 15.99%
2011 -17.16% -7.6%
2010 11.97% 12.31%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% 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

XLF vs. ACWI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
ACWI $10,000 $27,241 10.21%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

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%.

XLF’s CAGR is 1.95 percentage points higher than that of ACWI and as a result, would have yielded $3,541 more on a $10,000 investment. Thus, XLF outperformed ACWI by 1.95% annually.


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