A sound investment process and strong management team underpin Communication Services Sel Sect SPDR®ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and volatility exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Alphabet

T-Mobile US

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AT&T

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Netflix

Comcast

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Communication Services Sel Sect SPDR® Fd earns an Above Average Process Pillar rating. The primary contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Impressive risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to correspond generally to the price and yield performance of publicly traded equity securities of companies in the Communication Services Select Sector Index.  Normally, the fund generally invests substantially all, but at least 95%, of its total assets in the securities comprising the index. The index includes companies that have been identified as Communication Services companies by the GICS®, and including securities of companies from the following industries: diversified telecommunication services; wireless telecommunication services; media; entertainment; and interactive media & services. The fund is non-diversified. 

 The portfolio is overweight in communication services by 22.9 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 15.3 and 4.5 percentage points of assets, respectively. The strategy owns 23 securities and is relatively concentrated. Specifically, 81.3% of the fund’s assets are housed within the top 10 holdings, as opposed to the category’s 64.0% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 28% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

State Street’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Kala O’Donnell. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of seven strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

Communication Services Select Sector SPDR Fund

XLC tracks a market-cap-weighted index of US telecommunication and media & entertainment components of the S&P 500 index.

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News for Communication Services Select Sector SPDR Fund ETF (XLC)