BSV vs. VEU: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between BSV and VEU? And which fund is better?

The expense ratio of BSV is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%). BSV is mostly comprised of AAA bonds while VEU has a high exposure to the financial services sector. Overall, BSV has provided lower returns than VEU over the past ten years.

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

Summary

BSV VEU
Name Vanguard Short-Term Bond Index Fund ETF Shares Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Short-Term Bond Foreign Large Blend
Issuer Vanguard Vanguard
AUM 67.71B 53.64B
Avg. Return 2.27% 6.64%
Div. Yield 1.48% 2.31%
Expense Ratio 0.05% 0.08%

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

BSV’s dividend yield is 0.83% lower than that of VEU (1.48% vs. 2.31%). Also, BSV yielded on average 4.37% less per year over the past decade (2.27% vs. 6.64%). The expense ratio of BSV is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%).

Fund Composition

Holdings

BSV - Holdings

BSV Bond Sectors Weight
AAA 71.65%
BBB 13.08%
A 11.95%
AA 3.28%
Others 0.03%
Below B 0.01%
B 0.0%
BB 0.0%
US Government 0.0%

BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

Risk Analysis

BSV VEU
Mean Return 0.16 0.56
R-squared 78.38 98.44
Std. Deviation 1.33 15.08
Alpha 0.21 0.28
Beta 0.38 0.99
Sharpe Ratio 0.98 0.4
Treynor Ratio 3.33 5.12

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Alpha of 0.21 with a Mean Return of 0.16 and a Treynor Ratio of 3.33. Its Standard Deviation is 1.33 while BSV’s Sharpe Ratio is 0.98. Furthermore, the fund has a R-squared of 78.38 and a Beta of 0.38.

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Mean Return of 0.56 and a Sharpe Ratio of 0.4. Its Alpha is 0.28 while VEU’s Beta is 0.99. Furthermore, the fund has a Treynor Ratio of 5.12 and a Standard Deviation of 15.08.

BSV’s Mean Return is 0.40 points lower than that of VEU and its R-squared is 20.06 points lower. With a Standard Deviation of 1.33, BSV is slightly less volatile than VEU. The Alpha and Beta of BSV are 0.07 points lower and 0.61 points lower than VEU’s Alpha and Beta.

Performance

Annual Returns

BSV vs. VEU - Annual Returns

Year BSV VEU
2020 4.67% 11.39%
2019 4.92% 21.63%
2018 1.34% -13.97%
2017 1.2% 27.27%
2016 1.42% 4.77%
2015 0.92% -4.67%
2014 1.32% -4.05%
2013 0.17% 14.5%
2012 1.98% 18.55%
2011 3.04% -14.25%
2010 4.0% 11.85%

BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% respectively.

The year 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

BSV vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
BSV $10,000 $12,785 2.27%
VEU $10,000 $18,507 6.64%

A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.

BSV’s CAGR is 4.37 percentage points lower than that of VEU and as a result, would have yielded $5,722 less on a $10,000 investment. Thus, BSV performed worse than VEU by 4.37% annually.


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