IWF vs. QUAL: What’s The Difference?

The iShares Russell 1000 Growth ETF (IWF) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IWF is a iShares Large Growth fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IWF and QUAL? And which fund is better?

The expense ratio of IWF is 0.04 percentage points higher than QUAL’s (0.19% vs. 0.15%). IWF also has a higher exposure to the technology sector and a higher standard deviation. Overall, IWF has provided higher returns than QUAL over the past ten years.

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

Summary

IWF QUAL
Name iShares Russell 1000 Growth ETF iShares MSCI USA Quality Factor ETF
Category Large Growth Large Blend
Issuer iShares iShares
AUM 72.16B 23.93B
Avg. Return 17.72% 13.42%
Div. Yield 0.52% 1.29%
Expense Ratio 0.19% 0.15%

The iShares Russell 1000 Growth ETF (IWF) is a Large Growth fund that is issued by iShares. It currently has 72.16B total assets under management and has yielded an average annual return of 17.72% over the past 10 years. The fund has a dividend yield of 0.52% with an expense ratio of 0.19%.

The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

IWF’s dividend yield is 0.77% lower than that of QUAL (0.52% vs. 1.29%). Also, IWF yielded on average 4.30% more per year over the past decade (17.72% vs. 13.42%). The expense ratio of IWF is 0.04 percentage points higher than QUAL’s (0.19% vs. 0.15%).

Fund Composition

Industry Exposure

IWF vs. QUAL - Industry Exposure

IWF QUAL
Technology 39.29% 22.52%
Industrials 6.19% 9.22%
Energy 0.28% 2.24%
Communication Services 12.82% 11.44%
Utilities 0.03% 2.41%
Healthcare 9.23% 13.22%
Consumer Defensive 4.31% 8.57%
Real Estate 1.85% 2.72%
Financial Services 7.36% 15.87%
Consumer Cyclical 17.62% 9.43%
Basic Materials 1.01% 2.35%

The iShares Russell 1000 Growth ETF (IWF) has the most exposure to the Technology sector at 39.29%. This is followed by Consumer Cyclical and Communication Services at 17.62% and 12.82% respectively. Energy (0.28%), Basic Materials (1.01%), and Real Estate (1.85%) only make up 3.14% of the fund’s total assets.

IWF’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Communication Services stocks at 4.31%, 6.19%, 7.36%, 9.23%, and 12.82%.

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

IWF is 16.77% more exposed to the Technology sector than QUAL (39.29% vs 22.52%). IWF’s exposure to Consumer Cyclical and Communication Services stocks is 8.19% higher and 1.38% higher respectively (17.62% vs. 9.43% and 12.82% vs. 11.44%). In total, Energy, Basic Materials, and Real Estate also make up 4.17% less of the fund’s holdings compared to QUAL (3.14% vs. 7.31%).

Holdings

IWF - Holdings

IWF Holdings Weight
Apple Inc 10.51%
Microsoft Corp 9.85%
Amazon.com Inc 6.63%
Facebook Inc Class A 3.91%
Alphabet Inc Class A 3.2%
Alphabet Inc Class C 3.03%
Tesla Inc 2.45%
NVIDIA Corp 2.14%
Visa Inc Class A 1.91%
The Home Depot Inc 1.62%

IWF’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.51%, 9.85%, 6.63%, 3.91%, and 3.2%.

Alphabet Inc Class C (3.03%), Tesla Inc (2.45%), and NVIDIA Corp (2.14%) have a slightly smaller but still significant weight. Visa Inc Class A and The Home Depot Inc are also represented in the IWF’s holdings at 1.91% and 1.62%.

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

Risk Analysis

IWF QUAL
Mean Return 1.48 0
R-squared 92.93 0
Std. Deviation 14.42 0
Alpha 2.16 0
Beta 1.03 0
Sharpe Ratio 1.19 0
Treynor Ratio 17.1 0

The iShares Russell 1000 Growth ETF (IWF) has a Treynor Ratio of 17.1 with a Beta of 1.03 and a Mean Return of 1.48. Its Sharpe Ratio is 1.19 while IWF’s Standard Deviation is 14.42. Furthermore, the fund has a R-squared of 92.93 and a Alpha of 2.16.

The iShares MSCI USA Quality Factor ETF (QUAL) has a Beta of 0 with a Alpha of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while QUAL’s Mean Return is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

IWF’s Mean Return is 1.48 points higher than that of QUAL and its R-squared is 92.93 points higher. With a Standard Deviation of 14.42, IWF is slightly more volatile than QUAL. The Alpha and Beta of IWF are 2.16 points higher and 1.03 points higher than QUAL’s Alpha and Beta.

Performance

Annual Returns

IWF vs. QUAL - Annual Returns

Year IWF QUAL
2020 38.21% 16.96%
2019 36.08% 34.14%
2018 -1.68% -5.77%
2017 29.96% 22.26%
2016 6.92% 9.18%
2015 5.48% 5.56%
2014 12.84% 11.62%
2013 33.19% 0.0%
2012 15.03% 0.0%
2011 2.47% 0.0%
2010 16.47% 0.0%

IWF had its best year in 2020 with an annual return of 38.21%. IWF’s worst year over the past decade yielded -1.68% and occurred in 2018. In most years the iShares Russell 1000 Growth ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.84%, 15.03%, and 16.47% respectively.

The year 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.

Portfolio Growth

IWF vs. QUAL - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWF $10,000 $30,582 17.72%
QUAL $10,000 $23,251 13.42%

A $10,000 investment in IWF would have resulted in a final balance of $30,582. This is a profit of $20,582 over 7 years and amounts to a compound annual growth rate (CAGR) of 17.72%.

With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.

IWF’s CAGR is 4.30 percentage points higher than that of QUAL and as a result, would have yielded $7,331 more on a $10,000 investment. Thus, IWF outperformed QUAL by 4.30% annually.


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