XLF vs. IWN: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IWN is a iShares Small Value fund. So, what’s the difference between XLF and IWN? And which fund is better?

The expense ratio of XLF is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%). XLF also has a higher exposure to the financial services sector and a lower standard deviation. Overall, XLF has provided higher returns than IWN over the past ten years.

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

Summary

XLF IWN
Name Financial Select Sector SPDR Fund iShares Russell 2000 Value ETF
Category Financial Small Value
Issuer SPDR State Street Global Advisors iShares
AUM 40.81B 15.48B
Avg. Return 12.17% 10.96%
Div. Yield 1.57% 1.26%
Expense Ratio 0.12% 0.24%

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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

XLF’s dividend yield is 0.31% higher than that of IWN (1.57% vs. 1.26%). Also, XLF yielded on average 1.20% more per year over the past decade (12.17% vs. 10.96%). The expense ratio of XLF is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).

Fund Composition

Industry Exposure

XLF vs. IWN - Industry Exposure

XLF IWN
Technology 0.0% 6.02%
Industrials 0.0% 14.58%
Energy 0.0% 5.84%
Communication Services 0.0% 4.17%
Utilities 0.0% 4.69%
Healthcare 0.0% 10.94%
Consumer Defensive 0.0% 3.77%
Real Estate 0.0% 14.36%
Financial Services 100.0% 22.97%
Consumer Cyclical 0.0% 8.39%
Basic Materials 0.0% 4.29%

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 Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

XLF is 77.03% more exposed to the Financial Services sector than IWN (100.0% vs 22.97%). XLF’s exposure to Technology and Industrials stocks is 6.02% lower and 14.58% lower respectively (0.0% vs. 6.02% and 0.0% vs. 14.58%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 26.52% less of the fund’s holdings compared to IWN (0.00% vs. 26.52%).

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%.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

Risk Analysis

XLF IWN
Mean Return 1.21 1.01
R-squared 73.26 72.64
Std. Deviation 18.86 19.28
Alpha 2.63 -6.32
Beta 1.15 1.21
Sharpe Ratio 0.74 0.59
Treynor Ratio 11.25 8.3

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

The iShares Russell 2000 Value ETF (IWN) has a Standard Deviation of 19.28 with a Treynor Ratio of 8.3 and a Beta of 1.21. Its R-squared is 72.64 while IWN’s Alpha is -6.32. Furthermore, the fund has a Sharpe Ratio of 0.59 and a Mean Return of 1.01.

XLF’s Mean Return is 0.20 points higher than that of IWN and its R-squared is 0.62 points higher. With a Standard Deviation of 18.86, XLF is slightly less volatile than IWN. The Alpha and Beta of XLF are 8.95 points higher and 0.06 points lower than IWN’s Alpha and Beta.

Performance

Annual Returns

XLF vs. IWN - Annual Returns

Year XLF IWN
2020 -1.68% 4.5%
2019 31.88% 22.17%
2018 -13.09% -12.94%
2017 22.03% 7.73%
2016 22.55% 31.64%
2015 -1.6% -7.53%
2014 15.02% 4.13%
2013 35.37% 34.3%
2012 28.53% 17.92%
2011 -17.16% -5.64%
2010 11.97% 24.29%

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 2013 was the strongest year for IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

XLF vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
IWN $10,000 $28,189 10.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

XLF’s CAGR is 1.20 percentage points higher than that of IWN and as a result, would have yielded $2,593 more on a $10,000 investment. Thus, XLF outperformed IWN by 1.20% annually.


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