The Financial Select Sector SPDR Fund (XLF) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between XLF and IWS? And which fund is better?
The expense ratio of XLF is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than IWS over the past ten years.
In this article, we’ll compare XLF vs. IWS. We’ll look at holdings and fund composition, as well as at their risk metrics and performance. Moreover, I’ll also discuss XLF’s and IWS’s portfolio growth, annual returns, and industry exposure and examine how these affect their overall returns.
Summary
| XLF | IWS | |
| Name | Financial Select Sector SPDR Fund | iShares Russell Mid-Cap Value ETF |
| Category | Financial | Mid-Cap Value |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 40.81B | 14.24B |
| Avg. Return | 12.17% | 12.35% |
| Div. Yield | 1.57% | 1.34% |
| Expense Ratio | 0.12% | 0.23% |
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 Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.
XLF’s dividend yield is 0.23% higher than that of IWS (1.57% vs. 1.34%). Also, XLF yielded on average 0.18% less per year over the past decade (12.17% vs. 12.35%). The expense ratio of XLF is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%).
Fund Composition
Industry Exposure
| XLF | IWS | |
| Technology | 0.0% | 11.39% |
| Industrials | 0.0% | 14.6% |
| Energy | 0.0% | 4.71% |
| Communication Services | 0.0% | 4.08% |
| Utilities | 0.0% | 6.97% |
| Healthcare | 0.0% | 8.56% |
| Consumer Defensive | 0.0% | 4.76% |
| Real Estate | 0.0% | 11.71% |
| Financial Services | 100.0% | 15.75% |
| Consumer Cyclical | 0.0% | 12.07% |
| Basic Materials | 0.0% | 5.4% |
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 Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.
IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.
XLF is 84.25% more exposed to the Financial Services sector than IWS (100.0% vs 15.75%). XLF’s exposure to Technology and Industrials stocks is 11.39% lower and 14.60% lower respectively (0.0% vs. 11.39% and 0.0% vs. 14.6%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 28.54% less of the fund’s holdings compared to IWS (0.00% vs. 28.54%).
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%.
| IWS Holdings | Weight |
| Twitter Inc | 0.69% |
| Marvell Technology Inc | 0.69% |
| IHS Markit Ltd | 0.62% |
| Prudential Financial Inc | 0.56% |
| Otis Worldwide Corp Ordinary Shares | 0.54% |
| International Flavors & Fragrances Inc | 0.53% |
| Xcel Energy Inc | 0.52% |
| Motorola Solutions Inc | 0.52% |
| Aptiv PLC | 0.52% |
| Aflac Inc | 0.52% |
IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.
International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.
Risk Analysis
| XLF | IWS | |
| Mean Return | 1.21 | 1.06 |
| R-squared | 73.26 | 87.04 |
| Std. Deviation | 18.86 | 16.03 |
| Alpha | 2.63 | -4.11 |
| Beta | 1.15 | 1.1 |
| Sharpe Ratio | 0.74 | 0.75 |
| Treynor Ratio | 11.25 | 10.3 |
The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a R-squared of 73.26 and a Mean Return of 1.21. Its Standard Deviation is 18.86 while XLF’s Alpha is 2.63. Furthermore, the fund has a Treynor Ratio of 11.25 and a Beta of 1.15.
The iShares Russell Mid-Cap Value ETF (IWS) has a Treynor Ratio of 10.3 with a Alpha of -4.11 and a Standard Deviation of 16.03. Its Sharpe Ratio is 0.75 while IWS’s Mean Return is 1.06. Furthermore, the fund has a R-squared of 87.04 and a Beta of 1.1.
XLF’s Mean Return is 0.15 points higher than that of IWS and its R-squared is 13.78 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than IWS. The Alpha and Beta of XLF are 6.74 points higher and 0.05 points higher than IWS’s Alpha and Beta.
Performance
Annual Returns
| Year | XLF | IWS |
| 2020 | -1.68% | 4.76% |
| 2019 | 31.88% | 26.78% |
| 2018 | -13.09% | -12.36% |
| 2017 | 22.03% | 13.1% |
| 2016 | 22.55% | 19.69% |
| 2015 | -1.6% | -4.93% |
| 2014 | 15.02% | 14.49% |
| 2013 | 35.37% | 33.11% |
| 2012 | 28.53% | 18.27% |
| 2011 | -17.16% | -1.55% |
| 2010 | 11.97% | 24.46% |
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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLF | $10,000 | $30,782 | 12.17% |
| IWS | $10,000 | $33,083 | 12.35% |
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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.
XLF’s CAGR is 0.18 percentage points lower than that of IWS and as a result, would have yielded $2,301 less on a $10,000 investment. Thus, XLF performed worse than IWS by 0.18% annually.
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