The Health Care Select Sector SPDR Fund (XLV) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between XLV and MBB? And which fund is better?
The expense ratio of XLV is 0.06 percentage points higher than MBB’s (0.12% vs. 0.06%). XLV also has a high exposure to the healthcare sector while MBB is mostly comprised of AAA bonds. Overall, XLV has provided higher returns than MBB over the past ten years.
In this article, we’ll compare XLV vs. MBB. We’ll look at risk metrics and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss XLV’s and MBB’s portfolio growth, fund composition, and holdings and examine how these affect their overall returns.
Summary
| XLV | MBB | |
| Name | Health Care Select Sector SPDR Fund | iShares MBS ETF |
| Category | Health | Intermediate Government |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 27.88B | 25.69B |
| Avg. Return | 15.02% | 3.08% |
| Div. Yield | 1.4% | 1.88% |
| 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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
XLV’s dividend yield is 0.48% lower than that of MBB (1.4% vs. 1.88%). Also, XLV yielded on average 11.95% more per year over the past decade (15.02% vs. 3.08%). The expense ratio of XLV is 0.06 percentage points higher than MBB’s (0.12% vs. 0.06%).
Fund Composition
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%.
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.
Risk Analysis
| XLV | MBB | |
| Mean Return | 1.27 | 0.2 |
| R-squared | 58.19 | 74.38 |
| Std. Deviation | 12.94 | 2.12 |
| Alpha | 7.75 | 0.14 |
| Beta | 0.7 | 0.6 |
| Sharpe Ratio | 1.13 | 0.87 |
| Treynor Ratio | 21.1 | 3.02 |
The Health Care Select Sector SPDR Fund (XLV) has a Standard Deviation of 12.94 with a Mean Return of 1.27 and a Alpha of 7.75. Its R-squared is 58.19 while XLV’s Sharpe Ratio is 1.13. Furthermore, the fund has a Treynor Ratio of 21.1 and a Beta of 0.7.
The iShares MBS ETF (MBB) has a R-squared of 74.38 with a Alpha of 0.14 and a Treynor Ratio of 3.02. Its Beta is 0.6 while MBB’s Standard Deviation is 2.12. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Mean Return of 0.2.
XLV’s Mean Return is 1.07 points higher than that of MBB and its R-squared is 16.19 points lower. With a Standard Deviation of 12.94, XLV is slightly more volatile than MBB. The Alpha and Beta of XLV are 7.61 points higher and 0.10 points higher than MBB’s Alpha and Beta.
Performance
Annual Returns
| Year | XLV | MBB |
| 2020 | 13.33% | 4.03% |
| 2019 | 20.63% | 6.27% |
| 2018 | 6.3% | 0.81% |
| 2017 | 21.7% | 2.37% |
| 2016 | -2.83% | 1.28% |
| 2015 | 6.82% | 1.28% |
| 2014 | 25.17% | 6.16% |
| 2013 | 41.24% | -1.92% |
| 2012 | 17.56% | 2.23% |
| 2011 | 12.44% | 5.88% |
| 2010 | 2.91% | 5.44% |
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 MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLV | $10,000 | $44,147 | 15.02% |
| MBB | $10,000 | $13,906 | 3.08% |
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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
XLV’s CAGR is 11.95 percentage points higher than that of MBB and as a result, would have yielded $30,241 more on a $10,000 investment. Thus, XLV outperformed MBB by 11.95% annually.
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