XLV vs. IGSB: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between XLV and IGSB? And which fund is better?

The expense ratio of XLV is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%). XLV also has a high exposure to the healthcare sector while IGSB is mostly comprised of BBB bonds. Overall, XLV has provided higher returns than IGSB over the past ten years.

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

Summary

XLV IGSB
Name Health Care Select Sector SPDR Fund iShares 1-5 Year Investment Grade Corporate Bond ETF
Category Health Short-Term Bond
Issuer SPDR State Street Global Advisors iShares
AUM 27.88B 26.63B
Avg. Return 15.02% 2.51%
Div. Yield 1.4% 2.02%
Expense Ratio 0.12% 0.06%

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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

XLV’s dividend yield is 0.62% lower than that of IGSB (1.4% vs. 2.02%). Also, XLV yielded on average 12.52% more per year over the past decade (15.02% vs. 2.51%). The expense ratio of XLV is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%).

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%.

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

XLV IGSB
Mean Return 1.27 0.19
R-squared 58.19 26.13
Std. Deviation 12.94 2
Alpha 7.75 0.69
Beta 0.7 0.34
Sharpe Ratio 1.13 0.82
Treynor Ratio 21.1 4.82

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

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Standard Deviation of 2 with a Beta of 0.34 and a Mean Return of 0.19. Its R-squared is 26.13 while IGSB’s Treynor Ratio is 4.82. Furthermore, the fund has a Sharpe Ratio of 0.82 and a Alpha of 0.69.

XLV’s Mean Return is 1.08 points higher than that of IGSB and its R-squared is 32.06 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than IGSB. The Alpha and Beta of XLV are 7.06 points higher and 0.36 points higher than IGSB’s Alpha and Beta.

Performance

Annual Returns

XLV vs. IGSB - Annual Returns

Year XLV IGSB
2020 13.33% 5.26%
2019 20.63% 7.01%
2018 6.3% 1.34%
2017 21.7% 1.41%
2016 -2.83% 1.77%
2015 6.82% 0.7%
2014 25.17% 0.74%
2013 41.24% 1.03%
2012 17.56% 3.28%
2011 12.44% 1.34%
2010 2.91% 3.69%

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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

XLV vs. IGSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
IGSB $10,000 $13,103 2.51%

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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.

XLV’s CAGR is 12.52 percentage points higher than that of IGSB and as a result, would have yielded $31,044 more on a $10,000 investment. Thus, XLV outperformed IGSB by 12.52% annually.


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