XLI vs. TLT: What’s The Difference?

The Industrial Select Sector SPDR Fund (XLI) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. XLI is a SPDR State Street Global Advisors Industrials fund and TLT is a iShares Long Government fund. So, what’s the difference between XLI and TLT? And which fund is better?

The expense ratio of XLI is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%). XLI also has a high exposure to the industrials sector while TLT is mostly comprised of AAA bonds. Overall, XLI has provided higher returns than TLT over the past 11 years.

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

Summary

XLI TLT
Name Industrial Select Sector SPDR Fund iShares 20+ Year Treasury Bond ETF
Category Industrials Long Government
Issuer SPDR State Street Global Advisors iShares
AUM 19.33B 15.15B
Avg. Return 14.44% 9.00%
Div. Yield 1.25% 1.5%
Expense Ratio 0.12% 0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

XLI’s dividend yield is 0.25% lower than that of TLT (1.25% vs. 1.5%). Also, XLI yielded on average 5.45% more per year over the past decade (14.44% vs. 9.00%). The expense ratio of XLI is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%).

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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%.

TLT - Holdings

TLT 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%

TLT’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 TLT
Mean Return 1.14 0.63
R-squared 78.97 68.76
Std. Deviation 17.13 12.76
Alpha 2.38 -2.83
Beta 1.08 3.54
Sharpe Ratio 0.76 0.55
Treynor Ratio 11.34 1.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Alpha of -2.83 with a Standard Deviation of 12.76 and a Treynor Ratio of 1.82. Its Sharpe Ratio is 0.55 while TLT’s R-squared is 68.76. Furthermore, the fund has a Beta of 3.54 and a Mean Return of 0.63.

XLI’s Mean Return is 0.51 points higher than that of TLT and its R-squared is 10.21 points higher. With a Standard Deviation of 17.13, XLI is slightly more volatile than TLT. The Alpha and Beta of XLI are 5.21 points higher and 2.46 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

XLI vs. TLT - Annual Returns

Year XLI TLT
2020 11.0% 17.92%
2019 29.11% 14.93%
2018 -13.1% -2.07%
2017 23.85% 8.92%
2016 19.93% 1.36%
2015 -4.27% -1.65%
2014 10.44% 27.35%
2013 40.44% -13.91%
2012 14.86% 3.25%
2011 -1.01% 33.6%
2010 27.62% 9.25%

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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

XLI vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLI $10,000 $39,853 14.44%
TLT $10,000 $23,809 9.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

XLI’s CAGR is 5.45 percentage points higher than that of TLT and as a result, would have yielded $16,044 more on a $10,000 investment. Thus, XLI outperformed TLT by 5.45% annually.


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