XLF vs. USMV: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and USMV is a iShares Large Blend fund. So, what’s the difference between XLF and USMV? And which fund is better?

The expense ratio of XLF is 0.03 percentage points lower than USMV’s (0.12% vs. 0.15%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than USMV over the past ten years.

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

Summary

XLF USMV
Name Financial Select Sector SPDR Fund iShares MSCI USA Min Vol Factor ETF
Category Financial Large Blend
Issuer SPDR State Street Global Advisors iShares
AUM 40.81B 27.6B
Avg. Return 12.17% 13.89%
Div. Yield 1.57% 1.5%
Expense Ratio 0.12% 0.15%

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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

XLF’s dividend yield is 0.07% higher than that of USMV (1.57% vs. 1.5%). Also, XLF yielded on average 1.73% less per year over the past decade (12.17% vs. 13.89%). The expense ratio of XLF is 0.03 percentage points lower than USMV’s (0.12% vs. 0.15%).

Fund Composition

Industry Exposure

XLF vs. USMV - Industry Exposure

XLF USMV
Technology 0.0% 20.53%
Industrials 0.0% 10.51%
Energy 0.0% 0.21%
Communication Services 0.0% 11.03%
Utilities 0.0% 6.93%
Healthcare 0.0% 18.42%
Consumer Defensive 0.0% 12.82%
Real Estate 0.0% 2.73%
Financial Services 100.0% 9.65%
Consumer Cyclical 0.0% 5.53%
Basic Materials 0.0% 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 MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

XLF is 90.35% more exposed to the Financial Services sector than USMV (100.0% vs 9.65%). XLF’s exposure to Technology and Industrials stocks is 20.53% lower and 10.51% lower respectively (0.0% vs. 20.53% and 0.0% vs. 10.51%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.08% less of the fund’s holdings compared to USMV (0.00% vs. 21.08%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

Risk Analysis

XLF USMV
Mean Return 1.21 0
R-squared 73.26 0
Std. Deviation 18.86 0
Alpha 2.63 0
Beta 1.15 0
Sharpe Ratio 0.74 0
Treynor Ratio 11.25 0

The Financial Select Sector SPDR Fund (XLF) has a R-squared of 73.26 with a Alpha of 2.63 and a Beta of 1.15. 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 Treynor Ratio of 11.25.

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Mean Return of 0 with a Beta of 0 and a Standard Deviation of 0. Its R-squared is 0 while USMV’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.

XLF’s Mean Return is 1.21 points higher than that of USMV and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than USMV. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than USMV’s Alpha and Beta.

Performance

Annual Returns

XLF vs. USMV - Annual Returns

Year XLF USMV
2020 -1.68% 5.6%
2019 31.88% 27.77%
2018 -13.09% 1.36%
2017 22.03% 18.97%
2016 22.55% 10.5%
2015 -1.6% 5.5%
2014 15.02% 16.34%
2013 35.37% 25.11%
2012 28.53% 11.04%
2011 -17.16% 0.0%
2010 11.97% 0.0%

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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

XLF vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $25,820 12.17%
USMV $10,000 $27,607 13.89%

A $10,000 investment in XLF would have resulted in a final balance of $25,820. This is a profit of $15,820 over 8 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

XLF’s CAGR is 1.73 percentage points lower than that of USMV and as a result, would have yielded $1,787 less on a $10,000 investment. Thus, XLF performed worse than USMV by 1.73% annually.


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