XLF vs. VBR: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VBR is a Vanguard Small Value fund. So, what’s the difference between XLF and VBR? And which fund is better?

The expense ratio of XLF is 0.05 percentage points higher than VBR’s (0.12% vs. 0.07%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VBR over the past ten years.

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

Summary

XLF VBR
Name Financial Select Sector SPDR Fund Vanguard Small-Cap Value Index Fund ETF Shares
Category Financial Small Value
Issuer SPDR State Street Global Advisors Vanguard
AUM 40.81B 48.08B
Avg. Return 12.17% 12.28%
Div. Yield 1.57% 1.6%
Expense Ratio 0.12% 0.07%

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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

XLF’s dividend yield is 0.03% lower than that of VBR (1.57% vs. 1.6%). Also, XLF yielded on average 0.12% less per year over the past decade (12.17% vs. 12.28%). The expense ratio of XLF is 0.05 percentage points higher than VBR’s (0.12% vs. 0.07%).

Fund Composition

Industry Exposure

XLF vs. VBR - Industry Exposure

XLF VBR
Technology 0.0% 8.39%
Industrials 0.0% 18.44%
Energy 0.0% 5.15%
Communication Services 0.0% 1.77%
Utilities 0.0% 3.65%
Healthcare 0.0% 7.16%
Consumer Defensive 0.0% 4.36%
Real Estate 0.0% 10.92%
Financial Services 100.0% 20.04%
Consumer Cyclical 0.0% 13.82%
Basic Materials 0.0% 6.31%

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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

XLF is 79.96% more exposed to the Financial Services sector than VBR (100.0% vs 20.04%). XLF’s exposure to Technology and Industrials stocks is 8.39% lower and 18.44% lower respectively (0.0% vs. 8.39% and 0.0% vs. 18.44%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 29.10% less of the fund’s holdings compared to VBR (0.00% vs. 29.10%).

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%.

VBR - Holdings

VBR Holdings Weight
Diamondback Energy Inc 0.55%
VICI Properties Inc Ordinary Shares 0.54%
IDEX Corp 0.54%
Nuance Communications Inc 0.5%
Molina Healthcare Inc 0.48%
Signature Bank 0.46%
Novavax Inc 0.44%
Howmet Aerospace Inc 0.44%
Apollo Global Management Inc Class A 0.42%
Brown & Brown Inc 0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

Risk Analysis

XLF VBR
Mean Return 1.21 1.08
R-squared 73.26 82.2
Std. Deviation 18.86 18.37
Alpha 2.63 -5.09
Beta 1.15 1.23
Sharpe Ratio 0.74 0.67
Treynor Ratio 11.25 9.15

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

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Beta of 1.23 with a Mean Return of 1.08 and a Standard Deviation of 18.37. Its R-squared is 82.2 while VBR’s Alpha is -5.09. Furthermore, the fund has a Sharpe Ratio of 0.67 and a Treynor Ratio of 9.15.

XLF’s Mean Return is 0.13 points higher than that of VBR and its R-squared is 8.94 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VBR. The Alpha and Beta of XLF are 7.72 points higher and 0.08 points lower than VBR’s Alpha and Beta.

Performance

Annual Returns

XLF vs. VBR - Annual Returns

Year XLF VBR
2020 -1.68% 5.82%
2019 31.88% 22.76%
2018 -13.09% -12.22%
2017 22.03% 11.79%
2016 22.55% 24.8%
2015 -1.6% -4.67%
2014 15.02% 10.55%
2013 35.37% 36.57%
2012 28.53% 18.78%
2011 -17.16% -4.05%
2010 11.97% 24.97%

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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.

Portfolio Growth

XLF vs. VBR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
VBR $10,000 $32,611 12.28%

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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.

XLF’s CAGR is 0.12 percentage points lower than that of VBR and as a result, would have yielded $1,829 less on a $10,000 investment. Thus, XLF performed worse than VBR by 0.12% annually.


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