The Financial Select Sector SPDR Fund (XLF) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VLUE is a iShares Large Value fund. So, what’s the difference between XLF and VLUE? And which fund is better?
The expense ratio of XLF is 0.03 percentage points lower than VLUE’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 higher returns than VLUE over the past ten years.
In this article, we’ll compare XLF vs. VLUE. We’ll look at holdings and fund composition, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss XLF’s and VLUE’s performance, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||iShares MSCI USA Value Factor ETF|
|Issuer||SPDR State Street Global Advisors||iShares|
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 Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.
XLF’s dividend yield is 0.32% lower than that of VLUE (1.57% vs. 1.89%). Also, XLF yielded on average 3.26% more per year over the past decade (12.17% vs. 8.91%). The expense ratio of XLF is 0.03 percentage points lower than VLUE’s (0.12% vs. 0.15%).
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 Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.
VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.
XLF is 89.04% more exposed to the Financial Services sector than VLUE (100.0% vs 10.96%). XLF’s exposure to Technology and Industrials stocks is 26.89% lower and 9.14% lower respectively (0.0% vs. 26.89% and 0.0% vs. 9.14%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.07% less of the fund’s holdings compared to VLUE (0.00% vs. 21.07%).
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|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%.
|General Motors Co||3.19%|
|Micron Technology Inc||3.14%|
|Cisco Systems Inc||3.05%|
|International Business Machines Corp||2.76%|
|Ford Motor Co||2.23%|
VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.
International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.
The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a R-squared of 73.26 and a Alpha of 2.63. Its Treynor Ratio is 11.25 while XLF’s Mean Return is 1.21. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Standard Deviation of 18.86.
The iShares MSCI USA Value Factor ETF (VLUE) has a Beta of 0 with a Sharpe Ratio of 0 and a Standard Deviation of 0. Its Mean Return is 0 while VLUE’s R-squared is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Alpha of 0.
XLF’s Mean Return is 1.21 points higher than that of VLUE and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than VLUE. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than VLUE’s Alpha and Beta.
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 VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $19,073. This is a profit of $9,073 over 7 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.
XLF’s CAGR is 3.26 percentage points higher than that of VLUE and as a result, would have yielded $1,826 more on a $10,000 investment. Thus, XLF outperformed VLUE by 3.26% annually.
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