XLV vs. EMB: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between XLV and EMB? And which fund is better?

The expense ratio of XLV is 0.27 percentage points lower than EMB’s (0.12% vs. 0.39%). XLV also has a high exposure to the healthcare sector while EMB is mostly comprised of BBB bonds. Overall, XLV has provided higher returns than EMB over the past ten years.

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

Summary

XLV EMB
Name Health Care Select Sector SPDR Fund iShares J.P. Morgan USD Emerging Markets Bond ETF
Category Health Emerging Markets Bond
Issuer SPDR State Street Global Advisors iShares
AUM 27.88B 19.76B
Avg. Return 15.02% 6.43%
Div. Yield 1.4% 3.85%
Expense Ratio 0.12% 0.39%

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 iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

XLV’s dividend yield is 2.45% lower than that of EMB (1.4% vs. 3.85%). Also, XLV yielded on average 8.59% more per year over the past decade (15.02% vs. 6.43%). The expense ratio of XLV is 0.27 percentage points lower than EMB’s (0.12% vs. 0.39%).

Fund Composition

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%.

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

Risk Analysis

XLV EMB
Mean Return 1.27 0.44
R-squared 58.19 23.34
Std. Deviation 12.94 8.44
Alpha 7.75 0.89
Beta 0.7 1.36
Sharpe Ratio 1.13 0.55
Treynor Ratio 21.1 3.24

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

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Mean Return of 0.44 and a Alpha of 0.89. Its R-squared is 23.34 while EMB’s Treynor Ratio is 3.24. Furthermore, the fund has a Standard Deviation of 8.44 and a Beta of 1.36.

XLV’s Mean Return is 0.83 points higher than that of EMB and its R-squared is 34.85 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than EMB. The Alpha and Beta of XLV are 6.86 points higher and 0.66 points lower than EMB’s Alpha and Beta.

Performance

Annual Returns

XLV vs. EMB - Annual Returns

Year XLV EMB
2020 13.33% 5.48%
2019 20.63% 15.57%
2018 6.3% -5.67%
2017 21.7% 9.98%
2016 -2.83% 9.41%
2015 6.82% 0.43%
2014 25.17% 6.69%
2013 41.24% -7.42%
2012 17.56% 17.64%
2011 12.44% 7.2%
2010 2.91% 11.47%

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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

XLV vs. EMB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
EMB $10,000 $19,295 6.43%

A $10,000 investment in XLV would have resulted in a final balance of $44,147. This is a profit of $34,147 over 11 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.

XLV’s CAGR is 8.59 percentage points higher than that of EMB and as a result, would have yielded $24,852 more on a $10,000 investment. Thus, XLV outperformed EMB by 8.59% annually.


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