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XLF vs. IVW: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the iShares S&P 500 Growth ETF (IVW) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IVW is a iShares Large Growth fund. So, what’s the difference between XLF and IVW? And which fund is better?

The expense ratio of XLF is 0.06 percentage points lower than IVW’s (0.12% vs. 0.18%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than IVW over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

XLFIVW
NameFinancial Select Sector SPDR FundiShares S&P 500 Growth ETF
CategoryFinancialLarge Growth
IssuerSPDR State Street Global AdvisorsiShares
AUM40.81B35.72B
Avg. Return12.17%16.74%
Div. Yield1.57%0.61%
Expense Ratio0.12%0.18%

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 S&P 500 Growth ETF (IVW) is a Large Growth fund that is issued by iShares. It currently has 35.72B total assets under management and has yielded an average annual return of 16.74% over the past 10 years. The fund has a dividend yield of 0.61% with an expense ratio of 0.18%.

XLF’s dividend yield is 0.96% higher than that of IVW (1.57% vs. 0.61%). Also, XLF yielded on average 4.57% less per year over the past decade (12.17% vs. 16.74%). The expense ratio of XLF is 0.06 percentage points lower than IVW’s (0.12% vs. 0.18%).

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Fund Composition

Industry Exposure

XLF vs. IVW - Industry Exposure

XLFIVW
Technology0.0%37.8%
Industrials0.0%5.72%
Energy0.0%0.06%
Communication Services0.0%15.44%
Utilities0.0%0.47%
Healthcare0.0%11.88%
Consumer Defensive0.0%3.84%
Real Estate0.0%1.11%
Financial Services100.0%6.78%
Consumer Cyclical0.0%15.25%
Basic Materials0.0%1.65%

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 S&P 500 Growth ETF (IVW) has the most exposure to the Technology sector at 37.8%. This is followed by Communication Services and Consumer Cyclical at 15.44% and 15.25% respectively. Utilities (0.47%), Real Estate (1.11%), and Basic Materials (1.65%) only make up 3.23% of the fund’s total assets.

IVW’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 3.84%, 5.72%, 6.78%, 11.88%, and 15.25%.

XLF is 93.22% more exposed to the Financial Services sector than IVW (100.0% vs 6.78%). XLF’s exposure to Technology and Industrials stocks is 37.80% lower and 5.72% lower respectively (0.0% vs. 37.8% and 0.0% vs. 5.72%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 20.20% less of the fund’s holdings compared to IVW (0.00% vs. 20.20%).

Holdings

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

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%.

IVW - Holdings

IVW HoldingsWeight
Apple Inc11.46%
Microsoft Corp10.75%
Amazon.com Inc7.14%
Facebook Inc Class A4.28%
Alphabet Inc Class A4.06%
Alphabet Inc Class C3.86%
Tesla Inc2.65%
NVIDIA Corp2.43%
PayPal Holdings Inc1.62%
Adobe Inc1.49%

IVW’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 11.46%, 10.75%, 7.14%, 4.28%, and 4.06%.

Alphabet Inc Class C (3.86%), Tesla Inc (2.65%), and NVIDIA Corp (2.43%) have a slightly smaller but still significant weight. PayPal Holdings Inc and Adobe Inc are also represented in the IVW’s holdings at 1.62% and 1.49%.

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Risk Analysis

XLFIVW
Mean Return1.211.44
R-squared73.2693.82
Std. Deviation18.8613.77
Alpha2.632.19
Beta1.150.98
Sharpe Ratio0.741.21
Treynor Ratio11.2517.24

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

The iShares S&P 500 Growth ETF (IVW) has a Treynor Ratio of 17.24 with a Standard Deviation of 13.77 and a R-squared of 93.82. Its Alpha is 2.19 while IVW’s Mean Return is 1.44. Furthermore, the fund has a Beta of 0.98 and a Sharpe Ratio of 1.21.

XLF’s Mean Return is 0.23 points lower than that of IVW and its R-squared is 20.56 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than IVW. The Alpha and Beta of XLF are 0.44 points higher and 0.17 points higher than IVW’s Alpha and Beta.

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Performance

Annual Returns

XLF vs. IVW - Annual Returns

YearXLFIVW
2020-1.68%33.21%
201931.88%30.91%
2018-13.09%-0.17%
201722.03%27.2%
201622.55%6.74%
2015-1.6%5.33%
201415.02%14.67%
201335.37%32.48%
201228.53%14.39%
2011-17.16%4.49%
201011.97%14.84%

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 2020 was the strongest year for IVW, returning 33.21% on an annual basis. The poorest year for IVW in the last ten years was 2018, with a yield of -0.17%. Most years the iShares S&P 500 Growth ETF has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 14.39%, 14.67%, and 14.84% respectively.

Portfolio Growth

XLF vs. IVW - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLF$10,000$30,78212.17%
IVW$10,000$51,91516.74%

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 IVW, the end total would have been $51,915. This equates to a $41,915 profit over 11 years and a compound annual growth rate (CAGR) of 16.74%.

XLF’s CAGR is 4.57 percentage points lower than that of IVW and as a result, would have yielded $21,133 less on a $10,000 investment. Thus, XLF performed worse than IVW by 4.57% annually.


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