The Financial Select Sector SPDR Fund (XLF) and the iShares Russell Mid-Cap ETF (IWR) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IWR is a iShares Mid-Cap Blend fund. So, what’s the difference between XLF and IWR? And which fund is better?
The expense ratio of XLF is 0.07 percentage points lower than IWR’s (0.12% vs. 0.19%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than IWR over the past ten years.
In this article, we’ll compare XLF vs. IWR. We’ll look at performance and holdings, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss XLF’s and IWR’s portfolio growth, industry exposure, and annual returns and examine how these affect their overall returns.
Summary
| XLF | IWR | |
| Name | Financial Select Sector SPDR Fund | iShares Russell Mid-Cap ETF |
| Category | Financial | Mid-Cap Blend |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 40.81B | 29.84B |
| Avg. Return | 12.17% | 14.15% |
| Div. Yield | 1.57% | 0.99% |
| Expense Ratio | 0.12% | 0.19% |
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 ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.
XLF’s dividend yield is 0.58% higher than that of IWR (1.57% vs. 0.99%). Also, XLF yielded on average 1.99% less per year over the past decade (12.17% vs. 14.15%). The expense ratio of XLF is 0.07 percentage points lower than IWR’s (0.12% vs. 0.19%).
Fund Composition
Industry Exposure
| XLF | IWR | |
| Technology | 0.0% | 19.67% |
| Industrials | 0.0% | 14.54% |
| Energy | 0.0% | 3.48% |
| Communication Services | 0.0% | 4.64% |
| Utilities | 0.0% | 4.46% |
| Healthcare | 0.0% | 11.76% |
| Consumer Defensive | 0.0% | 3.82% |
| Real Estate | 0.0% | 8.31% |
| Financial Services | 100.0% | 11.64% |
| Consumer Cyclical | 0.0% | 13.59% |
| Basic Materials | 0.0% | 4.1% |
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 ETF (IWR) has the most exposure to the Technology sector at 19.67%. This is followed by Industrials and Consumer Cyclical at 14.54% and 13.59% respectively. Consumer Defensive (3.82%), Basic Materials (4.1%), and Utilities (4.46%) only make up 12.38% of the fund’s total assets.
IWR’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Healthcare, and Consumer Cyclical stocks at 4.64%, 8.31%, 11.64%, 11.76%, and 13.59%.
XLF is 88.36% more exposed to the Financial Services sector than IWR (100.0% vs 11.64%). XLF’s exposure to Technology and Industrials stocks is 19.67% lower and 14.54% lower respectively (0.0% vs. 19.67% and 0.0% vs. 14.54%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 25.72% less of the fund’s holdings compared to IWR (0.00% vs. 25.72%).
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%.
| IWR Holdings | Weight |
| IDEXX Laboratories Inc | 0.51% |
| DocuSign Inc | 0.51% |
| Twitter Inc | 0.48% |
| Chipotle Mexican Grill Inc | 0.47% |
| Roku Inc Class A | 0.44% |
| Marvell Technology Inc | 0.44% |
| DexCom Inc | 0.44% |
| Trane Technologies PLC | 0.43% |
| MSCI Inc | 0.43% |
| Carrier Global Corp Ordinary Shares | 0.43% |
IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.
Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.
Risk Analysis
| XLF | IWR | |
| Mean Return | 1.21 | 1.17 |
| R-squared | 73.26 | 91.52 |
| Std. Deviation | 18.86 | 15.66 |
| Alpha | 2.63 | -2.8 |
| Beta | 1.15 | 1.11 |
| Sharpe Ratio | 0.74 | 0.86 |
| Treynor Ratio | 11.25 | 11.72 |
The Financial Select Sector SPDR Fund (XLF) has a Treynor Ratio of 11.25 with a Standard Deviation of 18.86 and a Alpha of 2.63. Its Beta is 1.15 while XLF’s R-squared is 73.26. Furthermore, the fund has a Mean Return of 1.21 and a Sharpe Ratio of 0.74.
The iShares Russell Mid-Cap ETF (IWR) has a Alpha of -2.8 with a Treynor Ratio of 11.72 and a Beta of 1.11. Its Sharpe Ratio is 0.86 while IWR’s R-squared is 91.52. Furthermore, the fund has a Standard Deviation of 15.66 and a Mean Return of 1.17.
XLF’s Mean Return is 0.04 points higher than that of IWR and its R-squared is 18.26 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than IWR. The Alpha and Beta of XLF are 5.43 points higher and 0.04 points higher than IWR’s Alpha and Beta.
Performance
Annual Returns
| Year | XLF | IWR |
| 2020 | -1.68% | 16.91% |
| 2019 | 31.88% | 30.31% |
| 2018 | -13.09% | -9.13% |
| 2017 | 22.03% | 18.32% |
| 2016 | 22.55% | 13.58% |
| 2015 | -1.6% | -2.57% |
| 2014 | 15.02% | 13.03% |
| 2013 | 35.37% | 34.5% |
| 2012 | 28.53% | 17.13% |
| 2011 | -17.16% | -1.67% |
| 2010 | 11.97% | 25.25% |
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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLF | $10,000 | $30,782 | 12.17% |
| IWR | $10,000 | $39,751 | 14.15% |
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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.
XLF’s CAGR is 1.99 percentage points lower than that of IWR and as a result, would have yielded $8,969 less on a $10,000 investment. Thus, XLF performed worse than IWR by 1.99% annually.
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