XLI vs. GOVT: What’s The Difference?

The Industrial Select Sector SPDR Fund (XLI) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. XLI is a SPDR State Street Global Advisors Industrials fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between XLI and GOVT? And which fund is better?

The expense ratio of XLI is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). XLI also has a high exposure to the industrials sector while GOVT is mostly comprised of AAA bonds. Overall, XLI has provided higher returns than GOVT over the past 8 years.

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

Summary

XLI GOVT
Name Industrial Select Sector SPDR Fund iShares U.S. Treasury Bond ETF
Category Industrials Intermediate Government
Issuer SPDR State Street Global Advisors iShares
AUM 19.33B 17.07B
Avg. Return 14.44% 2.67%
Div. Yield 1.25% 1.0%
Expense Ratio 0.12% 0.05%

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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

XLI’s dividend yield is 0.25% higher than that of GOVT (1.25% vs. 1.0%). Also, XLI yielded on average 11.77% more per year over the past decade (14.44% vs. 2.67%). The expense ratio of XLI is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%).

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Fund Composition

Holdings

XLI - 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%.

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

XLI GOVT
Mean Return 1.14 0
R-squared 78.97 0
Std. Deviation 17.13 0
Alpha 2.38 0
Beta 1.08 0
Sharpe Ratio 0.76 0
Treynor Ratio 11.34 0

The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Treynor Ratio of 11.34 and a Sharpe Ratio of 0.76. Its Beta is 1.08 while XLI’s Standard Deviation is 17.13. Furthermore, the fund has a R-squared of 78.97 and a Mean Return of 1.14.

The iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Treynor Ratio is 0 while GOVT’s Standard Deviation is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.

XLI’s Mean Return is 1.14 points higher than that of GOVT and its R-squared is 78.97 points higher. With a Standard Deviation of 17.13, XLI is slightly more volatile than GOVT. The Alpha and Beta of XLI are 2.38 points higher and 1.08 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

XLI vs. GOVT - Annual Returns

Year XLI GOVT
2020 11.0% 7.92%
2019 29.11% 6.71%
2018 -13.1% 0.74%
2017 23.85% 2.19%
2016 19.93% 0.92%
2015 -4.27% 0.76%
2014 10.44% 4.99%
2013 40.44% -2.84%
2012 14.86% 0.0%
2011 -1.01% 0.0%
2010 27.62% 0.0%

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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

XLI vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLI $10,000 $27,465 14.44%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in XLI would have resulted in a final balance of $27,465. This is a profit of $17,465 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.44%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

XLI’s CAGR is 11.77 percentage points higher than that of GOVT and as a result, would have yielded $15,168 more on a $10,000 investment. Thus, XLI outperformed GOVT by 11.77% annually.


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