State Street Global Advisors (SSGA) is known for its monster S&P 500 SPY ETF. With roughly $390 billion in AUM, SPY is one of the largest ETFs out there. Apart from SPY, they are also known for their SPDR “Spider” sector ETFs.
SYMBOL | FUND | LAUNCH_YEAR |
XLB | Materials Select Sector SPDR Fund | 1998 |
XLE | Energy Select Sector SPDR Fund | 1998 |
XLV | Health Care Select Sector SPDR Fund | 1998 |
XLI | Industrial Select Sector SPDR Fund | 1998 |
XLY | Consumer Discretionary Select Sector SPDR Fund | 1998 |
XLP | Consumer Staples Select Sector SPDR Fund | 1998 |
XLF | Financial Select Sector SPDR Fund | 1998 |
XLU | Utilities Select Sector SPDR Fund | 1998 |
XLK | Technology Select Sector SPDR Fund | 1998 |
XLRE | Real Estate Select Sector SPDR Fund | 2015 |
XLC | Communication Services Select Sector SPDR Fund | 2018 |
These ETFs allow investors to take a concentrated bet on a specific sector and are often used as a benchmark for professionals who specialize in those sectors.
Markets go through cycles where some sectors do well and some don’t. Some sectors are extremely volatile and some barely move.
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/spdr.annual-returns.sd_-1024x878.png)
Cross-correlations are all over the place.
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/spdr.corr.gif)
Given unstable cross-correlations and volatility, a naïve use of optimizers is a bad idea. For example, if you use these as inputs to generate an “efficient” portfolio, the weights wary widely from year to year.
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/spdr.annual-allocation-1024x512.png)
Consumer Staples (XLP) ends up gobbling up most of the allocation, followed by Utilities (XLU.) The performance of such a portfolio depends on what you are looking for.
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/spdr.cumulative-allocation-rets-1024x585.png)
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/spdr.cumulative-allocation-rets.2010-1024x585.png)
The efficient portfolio, given its large exposure to staples and utilities, has experienced lower drawdowns than both equity-weighted and S&P 500. This shows up in their Sharpe Ratios.
![](https://portalvhds29z8xdrqhczq.blob.core.windows.net/wordpress/2021/10/sharpe.png)
SPY remains the King when it comes to returns.
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