The iShares Russell 2000 ETF (IWM) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between IWM and VEU? And which fund is better?
The expense ratio of IWM is 0.11 percentage points higher than VEU’s (0.19% vs. 0.08%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than VEU over the past ten years.
In this article, we’ll compare IWM vs. VEU. We’ll look at fund composition and risk metrics, as well as at their performance and portfolio growth. Moreover, I’ll also discuss IWM’s and VEU’s annual returns, holdings, and industry exposure and examine how these affect their overall returns.
|Name||iShares Russell 2000 ETF||Vanguard FTSE All-World ex-US Index Fund ETF Shares|
|Category||Small Blend||Foreign Large Blend|
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.
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%.
IWM’s dividend yield is 1.45% lower than that of VEU (0.86% vs. 2.31%). Also, IWM yielded on average 6.88% more per year over the past decade (13.52% vs. 6.64%). The expense ratio of IWM is 0.11 percentage points higher than VEU’s (0.19% vs. 0.08%).
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The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.
IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.
VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.
IWM is 10.96% more exposed to the Healthcare sector than VEU (20.3% vs 9.34%). IWM’s exposure to Industrials and Technology stocks is 2.59% higher and 1.27% higher respectively (14.78% vs. 12.19% and 14.21% vs. 12.94%). In total, Consumer Defensive, Basic Materials, and Energy also make up 10.01% less of the fund’s holdings compared to VEU (11.13% vs. 21.14%).
|AMC Entertainment Holdings Inc Class A||0.52%|
|Intellia Therapeutics Inc||0.33%|
|BlackRock Cash Funds Treasury SL Agency||0.29%|
|Tenet Healthcare Corp||0.26%|
|Lattice Semiconductor Corp||0.26%|
|Tetra Tech Inc||0.25%|
|EastGroup Properties Inc||0.24%|
|Arrowhead Pharmaceuticals Inc||0.24%|
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
|Tencent Holdings Ltd||1.57%|
|Alibaba Group Holding Ltd Ordinary Shares||1.4%|
|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%|
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%.
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The iShares Russell 2000 ETF (IWM) has a Sharpe Ratio of 0.68 with a Standard Deviation of 18.87 and a Beta of 1.23. Its Alpha is -5.12 while IWM’s R-squared is 77.73. Furthermore, the fund has a Treynor Ratio of 9.56 and a Mean Return of 1.12.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Treynor Ratio of 5.12 with a Beta of 0.99 and a Alpha of 0.28. Its Mean Return is 0.56 while VEU’s Standard Deviation is 15.08. Furthermore, the fund has a Sharpe Ratio of 0.4 and a R-squared of 98.44.
IWM’s Mean Return is 0.56 points higher than that of VEU and its R-squared is 20.71 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than VEU. The Alpha and Beta of IWM are 5.40 points lower and 0.24 points higher than VEU’s Alpha and Beta.
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IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.
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%.
IWM’s CAGR is 6.88 percentage points higher than that of VEU and as a result, would have yielded $18,179 more on a $10,000 investment. Thus, IWM outperformed VEU by 6.88% annually.
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