The Industrial Select Sector SPDR Fund (XLI) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLI is a SPDR State Street Global Advisors Industrials fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLI and DFAC? And which fund is better?
The expense ratio of XLI is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLI also has a higher exposure to the industrials sector and a higher standard deviation. Overall, XLI has provided higher returns than DFAC over the past 11 years.
In this article, we’ll compare XLI vs. DFAC. We’ll look at performance and annual returns, as well as at their holdings and risk metrics. Moreover, I’ll also discuss XLI’s and DFAC’s portfolio growth, fund composition, and industry exposure and examine how these affect their overall returns.
Summary
| XLI | DFAC | |
| Name | Industrial Select Sector SPDR Fund | Dimensional U.S. Core Equity 2 ETF |
| Category | Industrials | Large Blend |
| Issuer | SPDR State Street Global Advisors | Dimensional Fund Advisors |
| AUM | 19.33B | 13.53B |
| Avg. Return | 14.44% | 13.93% |
| Div. Yield | 1.25% | 1.0% |
| Expense Ratio | 0.12% | 0.19% |
The Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
XLI’s dividend yield is 0.25% higher than that of DFAC (1.25% vs. 1.0%). Also, XLI yielded on average 0.51% more per year over the past decade (14.44% vs. 13.93%). The expense ratio of XLI is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).
Fund Composition
Industry Exposure
| XLI | DFAC | |
| Technology | 1.82% | 22.81% |
| Industrials | 97.49% | 14.13% |
| Energy | 0.0% | 2.67% |
| Communication Services | 0.0% | 7.63% |
| Utilities | 0.0% | 1.54% |
| Healthcare | 0.0% | 12.09% |
| Consumer Defensive | 0.0% | 5.94% |
| Real Estate | 0.0% | 0.37% |
| Financial Services | 0.0% | 16.17% |
| Consumer Cyclical | 0.69% | 13.09% |
| Basic Materials | 0.0% | 3.56% |
The Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.
DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.
XLI is 83.36% more exposed to the Industrials sector than DFAC (97.49% vs 14.13%). XLI’s exposure to Technology and Consumer Cyclical stocks is 20.99% lower and 12.40% lower respectively (1.82% vs. 22.81% and 0.69% vs. 13.09%). In total, Financial Services, Real Estate, and Consumer Defensive also make up 22.48% less of the fund’s holdings compared to DFAC (0.00% vs. 22.48%).
Holdings
| XLI Holdings | Weight |
| Honeywell International Inc | 4.9% |
| United Parcel Service Inc Class B | 4.84% |
| Union Pacific Corp | 4.7% |
| Boeing Co | 4.24% |
| Raytheon Technologies Corp | 4.16% |
| Caterpillar Inc | 3.84% |
| General Electric Co | 3.8% |
| 3M Co | 3.7% |
| Deere & Co | 3.54% |
| Lockheed Martin Corp | 2.98% |
XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.
Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.
| DFAC Holdings | Weight |
| Apple Inc | 4.7% |
| Microsoft Corp | 3.81% |
| Amazon.com Inc | 2.39% |
| Johnson & Johnson | 1.05% |
| Facebook Inc Class A | 1.05% |
| JPMorgan Chase & Co | 1.0% |
| Alphabet Inc Class C | 0.85% |
| Alphabet Inc Class A | 0.84% |
| Berkshire Hathaway Inc Class B | 0.75% |
| Visa Inc Class A | 0.74% |
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
Risk Analysis
| XLI | DFAC | |
| Mean Return | 1.14 | 1.19 |
| R-squared | 78.97 | 95.1 |
| Std. Deviation | 17.13 | 15.55 |
| Alpha | 2.38 | -2.75 |
| Beta | 1.08 | 1.12 |
| Sharpe Ratio | 0.76 | 0.88 |
| Treynor Ratio | 11.34 | 11.85 |
The Industrial Select Sector SPDR Fund (XLI) has a Mean Return of 1.14 with a Standard Deviation of 17.13 and a Treynor Ratio of 11.34. Its R-squared is 78.97 while XLI’s Alpha is 2.38. Furthermore, the fund has a Beta of 1.08 and a Sharpe Ratio of 0.76.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Mean Return of 1.19 with a Alpha of -2.75 and a Treynor Ratio of 11.85. Its Sharpe Ratio is 0.88 while DFAC’s Standard Deviation is 15.55. Furthermore, the fund has a Beta of 1.12 and a R-squared of 95.1.
XLI’s Mean Return is 0.05 points lower than that of DFAC and its R-squared is 16.13 points lower. With a Standard Deviation of 17.13, XLI is slightly more volatile than DFAC. The Alpha and Beta of XLI are 5.13 points higher and 0.04 points lower than DFAC’s Alpha and Beta.
Performance
Annual Returns
| Year | XLI | DFAC |
| 2020 | 11.0% | 15.8% |
| 2019 | 29.11% | 29.54% |
| 2018 | -13.1% | -9.43% |
| 2017 | 23.85% | 18.82% |
| 2016 | 19.93% | 16.31% |
| 2015 | -4.27% | -2.53% |
| 2014 | 10.44% | 9.56% |
| 2013 | 40.44% | 37.55% |
| 2012 | 14.86% | 17.93% |
| 2011 | -1.01% | -1.96% |
| 2010 | 27.62% | 21.67% |
XLI had its best year in 2013 with an annual return of 40.44%. XLI’s worst year over the past decade yielded -13.1% and occurred in 2018. In most years the Industrial Select Sector SPDR Fund provided moderate returns such as in 2020, 2012, and 2016 where annual returns amounted to 11.0%, 14.86%, and 19.93% respectively.
The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLI | $10,000 | $39,853 | 14.44% |
| DFAC | $10,000 | $38,796 | 13.93% |
A $10,000 investment in XLI would have resulted in a final balance of $39,853. This is a profit of $29,853 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.44%.
With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
XLI’s CAGR is 0.51 percentage points higher than that of DFAC and as a result, would have yielded $1,057 more on a $10,000 investment. Thus, XLI outperformed DFAC by 0.51% annually.
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