Reviving the Energy SPDR
Who could have foreseen the need to rescue a $39 billion Energy ETF? Indeed, the XLE requires a lifeline due to its concentration and underperformance.
A staggering 39% of the entire $39 billion is tied up in just two stocks, and you don’t need to guess which ones. Even a six-year-old in America could tell you their names. When you invest in XLE, you’re essentially going all-in on those two companies. Investors are savvy and, when they discover an alternative that doesn’t excessively rely on those two names, one that offers diversification and risk reduction without incurring tracking loss (See image below), you can only imagine the consequences.
Investors who have been on this journey for generations, starting with their grandparents and then their parents, won’t hesitate to part ways with the XLE SPDR. This is why the XLE SPDR needs to reinvent itself. The only way to do so is to break free from its flawed underlying S&P Energy Select Sector Index and embrace a more modern indexing approach. Alternatively, we stand ready to share our open methodology with the leadership at 1 Congress Street, Boston. There are always solutions waiting to be explored.
In the meantime, we’ve introduced our groundbreaking E&R XLE 24. The Exceptional & Rich XLE 24 has, on paper, outperformed the XLE by an impressive 22% since January 2020. The E&R has surged by 70% from its January 2020 lows, surpassing all inflation expectations and reaching heights previously unimaginable for the XLE.
For more information, you can access the factsheet here and download the open code base here. If you are an ETF manufacturer looking at reviving XLE, we are open to licensing agreements.
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