XLF vs. IWP: What’s The Difference?

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

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

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

Summary

XLF IWP
Name Financial Select Sector SPDR Fund iShares Russell Mid-Cap Growth ETF
Category Financial Mid-Cap Growth
Issuer SPDR State Street Global Advisors iShares
AUM 40.81B 15.7B
Avg. Return 12.17% 16.75%
Div. Yield 1.57% 0.26%
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 Mid-Cap Growth ETF (IWP) is a Mid-Cap Growth fund that is issued by iShares. It currently has 15.7B total assets under management and has yielded an average annual return of 16.75% over the past 10 years. The fund has a dividend yield of 0.26% with an expense ratio of 0.24%.

XLF’s dividend yield is 1.31% higher than that of IWP (1.57% vs. 0.26%). Also, XLF yielded on average 4.58% less per year over the past decade (12.17% vs. 16.75%). The expense ratio of XLF is 0.12 percentage points lower than IWP’s (0.12% vs. 0.24%).

Fund Composition

Industry Exposure

XLF vs. IWP - Industry Exposure

XLF IWP
Technology 0.0% 33.88%
Industrials 0.0% 14.09%
Energy 0.0% 1.51%
Communication Services 0.0% 6.32%
Utilities 0.0% 0.16%
Healthcare 0.0% 16.79%
Consumer Defensive 0.0% 2.32%
Real Estate 0.0% 2.46%
Financial Services 100.0% 4.52%
Consumer Cyclical 0.0% 16.09%
Basic Materials 0.0% 1.86%

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 Mid-Cap Growth ETF (IWP) has the most exposure to the Technology sector at 33.88%. This is followed by Healthcare and Consumer Cyclical at 16.79% and 16.09% respectively. Energy (1.51%), Basic Materials (1.86%), and Consumer Defensive (2.32%) only make up 5.69% of the fund’s total assets.

IWP’s mid-section with moderate exposure is comprised of Real Estate, Financial Services, Communication Services, Industrials, and Consumer Cyclical stocks at 2.46%, 4.52%, 6.32%, 14.09%, and 16.09%.

XLF is 95.48% more exposed to the Financial Services sector than IWP (100.0% vs 4.52%). XLF’s exposure to Technology and Industrials stocks is 33.88% lower and 14.09% lower respectively (0.0% vs. 33.88% and 0.0% vs. 14.09%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 20.87% less of the fund’s holdings compared to IWP (0.00% vs. 20.87%).

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%.

IWP - Holdings

IWP Holdings Weight
IDEXX Laboratories Inc 1.3%
DocuSign Inc 1.3%
Roku Inc Class A 1.29%
Match Group Inc 1.06%
Chipotle Mexican Grill Inc 1.06%
Pinterest Inc 1.05%
Veeva Systems Inc Class A 1.04%
Palantir Technologies Inc Ordinary Shares – Class A 1.04%
Lululemon Athletica Inc 1.01%
DexCom Inc 1.0%

IWP’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Roku Inc Class A, Match Group Inc, and Chipotle Mexican Grill Inc at 1.3%, 1.3%, 1.29%, 1.06%, and 1.06%.

Pinterest Inc (1.05%), Veeva Systems Inc Class A (1.04%), and Palantir Technologies Inc Ordinary Shares – Class A (1.04%) have a slightly smaller but still significant weight. Lululemon Athletica Inc and DexCom Inc are also represented in the IWP’s holdings at 1.01% and 1.0%.

Risk Analysis

XLF IWP
Mean Return 1.21 1.27
R-squared 73.26 87.01
Std. Deviation 18.86 16.05
Alpha 2.63 -1.03
Beta 1.15 1.1
Sharpe Ratio 0.74 0.91
Treynor Ratio 11.25 12.98

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

The iShares Russell Mid-Cap Growth ETF (IWP) has a Sharpe Ratio of 0.91 with a Mean Return of 1.27 and a Alpha of -1.03. Its R-squared is 87.01 while IWP’s Standard Deviation is 16.05. Furthermore, the fund has a Beta of 1.1 and a Treynor Ratio of 12.98.

XLF’s Mean Return is 0.06 points lower than that of IWP and its R-squared is 13.75 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than IWP. The Alpha and Beta of XLF are 3.66 points higher and 0.05 points higher than IWP’s Alpha and Beta.

Performance

Annual Returns

XLF vs. IWP - Annual Returns

Year XLF IWP
2020 -1.68% 35.29%
2019 31.88% 35.14%
2018 -13.09% -4.95%
2017 22.03% 24.98%
2016 22.55% 7.15%
2015 -1.6% -0.39%
2014 15.02% 11.68%
2013 35.37% 35.44%
2012 28.53% 15.62%
2011 -17.16% -1.82%
2010 11.97% 26.1%

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 IWP, returning 35.44% on an annual basis. The poorest year for IWP in the last ten years was 2018, with a yield of -4.95%. Most years the iShares Russell Mid-Cap Growth ETF has given investors modest returns, such as in 2014, 2012, and 2017, when gains were 11.68%, 15.62%, and 24.98% respectively.

Portfolio Growth

XLF vs. IWP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
IWP $10,000 $50,191 16.75%

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 IWP, the end total would have been $50,191. This equates to a $40,191 profit over 11 years and a compound annual growth rate (CAGR) of 16.75%.

XLF’s CAGR is 4.58 percentage points lower than that of IWP and as a result, would have yielded $19,409 less on a $10,000 investment. Thus, XLF performed worse than IWP by 4.58% annually.


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