IJR vs. VNQ: What’s The Difference?

The iShares Core S&P Small-Cap ETF (IJR) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. IJR is a iShares Small Blend fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between IJR and VNQ? And which fund is better?

The expense ratio of IJR is 0.06 percentage points lower than VNQ’s (0.06% vs. 0.12%). IJR also has a higher exposure to the industrials sector and a higher standard deviation. Overall, IJR has provided higher returns than VNQ over the past ten years.

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

Summary

IJR VNQ
Name iShares Core S&P Small-Cap ETF Vanguard Real Estate Index Fund ETF Shares
Category Small Blend Real Estate
Issuer iShares Vanguard
AUM 68.64B 77.34B
Avg. Return 13.97% 11.05%
Div. Yield 0.96% 2.34%
Expense Ratio 0.06% 0.12%

The iShares Core S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.

IJR’s dividend yield is 1.38% lower than that of VNQ (0.96% vs. 2.34%). Also, IJR yielded on average 2.92% more per year over the past decade (13.97% vs. 11.05%). The expense ratio of IJR is 0.06 percentage points lower than VNQ’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

IJR vs. VNQ - Industry Exposure

IJR VNQ
Technology 14.32% 0.0%
Industrials 17.31% 0.0%
Energy 4.0% 0.0%
Communication Services 2.59% 0.0%
Utilities 1.8% 0.0%
Healthcare 11.55% 0.0%
Consumer Defensive 4.01% 0.0%
Real Estate 9.55% 100.0%
Financial Services 15.91% 0.0%
Consumer Cyclical 13.61% 0.0%
Basic Materials 5.34% 0.0%

The iShares Core S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.

IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VNQ’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

IJR is 17.31% more exposed to the Industrials sector than VNQ (17.31% vs 0.0%). IJR’s exposure to Financial Services and Technology stocks is 15.91% higher and 14.32% higher respectively (15.91% vs. 0.0% and 14.32% vs. 0.0%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.60% more of the fund’s holdings compared to VNQ (10.60% vs. 0.00%).

Holdings

IJR - Holdings

IJR Holdings Weight
BlackRock Cash Funds Treasury SL Agency 1.08%
GameStop Corp Class A 0.86%
Omnicell Inc 0.61%
Stamps.com Inc 0.58%
Saia Inc 0.57%
Power Integrations Inc 0.57%
Exponent Inc 0.54%
NeoGenomics Inc 0.53%
Chart Industries Inc 0.53%
Macy’s Inc 0.51%

IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.

Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.

VNQ - Holdings

VNQ Holdings Weight
Vanguard Real Estate II Index 11.62%
American Tower Corp 7.24%
Prologis Inc 5.33%
Crown Castle International Corp 5.01%
Equinix Inc 4.3%
Public Storage 2.85%
Simon Property Group Inc 2.52%
Digital Realty Trust Inc 2.49%
SBA Communications Corp 2.1%
Welltower Inc 2.09%

VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.

Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.

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Risk Analysis

IJR VNQ
Mean Return 1.21 0.89
R-squared 76.03 44.4
Std. Deviation 18.68 16.13
Alpha -3.7 2.47
Beta 1.2 0.76
Sharpe Ratio 0.74 0.62
Treynor Ratio 10.77 11.9

The iShares Core S&P Small-Cap ETF (IJR) has a Treynor Ratio of 10.77 with a Mean Return of 1.21 and a Alpha of -3.7. Its Sharpe Ratio is 0.74 while IJR’s Standard Deviation is 18.68. Furthermore, the fund has a Beta of 1.2 and a R-squared of 76.03.

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a R-squared of 44.4 and a Standard Deviation of 16.13. Its Mean Return is 0.89 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Alpha of 2.47 and a Treynor Ratio of 11.9.

IJR’s Mean Return is 0.32 points higher than that of VNQ and its R-squared is 31.63 points higher. With a Standard Deviation of 18.68, IJR is slightly more volatile than VNQ. The Alpha and Beta of IJR are 6.17 points lower and 0.44 points higher than VNQ’s Alpha and Beta.

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Performance

Annual Returns

IJR vs. VNQ - Annual Returns

Year IJR VNQ
2020 11.24% -4.72%
2019 22.79% 28.91%
2018 -8.43% -5.95%
2017 13.2% 4.95%
2016 26.49% 8.53%
2015 -2.0% 2.37%
2014 5.67% 30.29%
2013 41.36% 2.42%
2012 16.28% 17.67%
2011 0.9% 8.62%
2010 26.14% 28.44%

IJR had its best year in 2013 with an annual return of 41.36%. IJR’s worst year over the past decade yielded -8.43% and occurred in 2018. In most years the iShares Core S&P Small-Cap ETF provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 11.24%, 13.2%, and 16.28% respectively.

The year 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.

Portfolio Growth

IJR vs. VNQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IJR $10,000 $38,800 13.97%
VNQ $10,000 $29,506 11.05%

A $10,000 investment in IJR would have resulted in a final balance of $38,800. This is a profit of $28,800 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.97%.

With a $10,000 investment in VNQ, the end total would have been $29,506. This equates to a $19,506 profit over 11 years and a compound annual growth rate (CAGR) of 11.05%.

IJR’s CAGR is 2.92 percentage points higher than that of VNQ and as a result, would have yielded $9,294 more on a $10,000 investment. Thus, IJR outperformed VNQ by 2.92% annually.


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