XLV vs. ARKK: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between XLV and ARKK? And which fund is better?

The expense ratio of XLV is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%). XLV also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, XLV has provided lower returns than ARKK over the past ten years.

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

Summary

XLV ARKK
Name Health Care Select Sector SPDR Fund ARK Innovation ETF
Category Health Mid-Cap Growth
Issuer SPDR State Street Global Advisors ARK ETF Trust
AUM 27.88B 25.52B
Avg. Return 15.02% 55.45%
Div. Yield 1.4% 0.0%
Expense Ratio 0.12% 0.75%

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

XLV’s dividend yield is 1.40% higher than that of ARKK (1.4% vs. 0.0%). Also, XLV yielded on average 40.43% less per year over the past decade (15.02% vs. 55.45%). The expense ratio of XLV is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%).

Fund Composition

Industry Exposure

XLV vs. ARKK - Industry Exposure

XLV ARKK
Technology 0.0% 30.5%
Industrials 0.0% 2.11%
Energy 0.0% 0.0%
Communication Services 0.0% 25.01%
Utilities 0.0% 0.0%
Healthcare 100.0% 29.47%
Consumer Defensive 0.0% 0.93%
Real Estate 0.0% 0.51%
Financial Services 0.0% 0.04%
Consumer Cyclical 0.0% 11.42%
Basic Materials 0.0% 0.0%

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

XLV is 70.53% more exposed to the Healthcare sector than ARKK (100.0% vs 29.47%). XLV’s exposure to Technology and Industrials stocks is 30.50% lower and 2.11% lower respectively (0.0% vs. 30.5% and 0.0% vs. 2.11%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 11.97% less of the fund’s holdings compared to ARKK (0.00% vs. 11.97%).

Holdings

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

Risk Analysis

XLV ARKK
Mean Return 1.27 0
R-squared 58.19 0
Std. Deviation 12.94 0
Alpha 7.75 0
Beta 0.7 0
Sharpe Ratio 1.13 0
Treynor Ratio 21.1 0

The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a Mean Return of 1.27 and a R-squared of 58.19. Its Standard Deviation is 12.94 while XLV’s Beta is 0.7. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Alpha of 7.75.

The ARK Innovation ETF (ARKK) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while ARKK’s Beta is 0. Furthermore, the fund has a R-squared of 0 and a Alpha of 0.

XLV’s Mean Return is 1.27 points higher than that of ARKK and its R-squared is 58.19 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than ARKK. The Alpha and Beta of XLV are 7.75 points higher and 0.70 points higher than ARKK’s Alpha and Beta.

Performance

Annual Returns

XLV vs. ARKK - Annual Returns

Year XLV ARKK
2020 13.33% 152.52%
2019 20.63% 35.73%
2018 6.3% 3.58%
2017 21.7% 87.38%
2016 -2.83% -1.96%
2015 6.82% 3.76%
2014 25.17% 0.0%
2013 41.24% 0.0%
2012 17.56% 0.0%
2011 12.44% 0.0%
2010 2.91% 0.0%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% respectively.

The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

XLV vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $17,185 15.02%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in XLV would have resulted in a final balance of $17,185. This is a profit of $7,185 over 5 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

XLV’s CAGR is 40.43 percentage points lower than that of ARKK and as a result, would have yielded $48,033 less on a $10,000 investment. Thus, XLV performed worse than ARKK by 40.43% annually.


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