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IWR vs. QUAL: What’s The Difference?

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

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

IWRQUAL
NameiShares Russell Mid-Cap ETFiShares MSCI USA Quality Factor ETF
CategoryMid-Cap BlendLarge Blend
IssueriSharesiShares
AUM29.84B23.93B
Avg. Return14.15%13.42%
Div. Yield0.99%1.29%
Expense Ratio0.19%0.15%

The iShares Russell Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% 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%.

IWR’s dividend yield is 0.30% lower than that of QUAL (0.99% vs. 1.29%). Also, IWR yielded on average 0.73% more per year over the past decade (14.15% vs. 13.42%). The expense ratio of IWR is 0.04 percentage points higher than QUAL’s (0.19% vs. 0.15%).

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Fund Composition

Industry Exposure

IWR vs. QUAL - Industry Exposure

IWRQUAL
Technology19.67%22.52%
Industrials14.54%9.22%
Energy3.48%2.24%
Communication Services4.64%11.44%
Utilities4.46%2.41%
Healthcare11.76%13.22%
Consumer Defensive3.82%8.57%
Real Estate8.31%2.72%
Financial Services11.64%15.87%
Consumer Cyclical13.59%9.43%
Basic Materials4.1%2.35%

The iShares Russell Mid-Cap ETF (IWR) has the most exposure to the Technology sector at 19.67%. This is followed by Industrials and Consumer Cyclical at 14.54% and 13.59% respectively. Consumer Defensive (3.82%), Basic Materials (4.1%), and Utilities (4.46%) only make up 12.38% of the fund’s total assets.

IWR’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Healthcare, and Consumer Cyclical stocks at 4.64%, 8.31%, 11.64%, 11.76%, and 13.59%.

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%.

IWR is 2.85% less exposed to the Technology sector than QUAL (19.67% vs 22.52%). IWR’s exposure to Industrials and Consumer Cyclical stocks is 5.32% higher and 4.16% higher respectively (14.54% vs. 9.22% and 13.59% vs. 9.43%). In total, Consumer Defensive, Basic Materials, and Utilities also make up 0.95% less of the fund’s holdings compared to QUAL (12.38% vs. 13.33%).

Holdings

IWR - Holdings

IWR HoldingsWeight
IDEXX Laboratories Inc0.51%
DocuSign Inc0.51%
Twitter Inc0.48%
Chipotle Mexican Grill Inc0.47%
Roku Inc Class A0.44%
Marvell Technology Inc0.44%
DexCom Inc0.44%
Trane Technologies PLC0.43%
MSCI Inc0.43%
Carrier Global Corp Ordinary Shares0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

QUAL - Holdings

QUAL HoldingsWeight
Facebook Inc Class A4.77%
Nike Inc Class B4.05%
Microsoft Corp3.54%
Apple Inc3.52%
Johnson & Johnson2.99%
BlackRock Inc2.87%
Target Corp2.8%
Mastercard Inc Class A2.72%
NVIDIA Corp2.71%
Alphabet Inc Class A2.49%

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%.

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Risk Analysis

IWRQUAL
Mean Return1.170
R-squared91.520
Std. Deviation15.660
Alpha-2.80
Beta1.110
Sharpe Ratio0.860
Treynor Ratio11.720

The iShares Russell Mid-Cap ETF (IWR) has a Mean Return of 1.17 with a Sharpe Ratio of 0.86 and a Beta of 1.11. Its Alpha is -2.8 while IWR’s R-squared is 91.52. Furthermore, the fund has a Standard Deviation of 15.66 and a Treynor Ratio of 11.72.

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

IWR’s Mean Return is 1.17 points higher than that of QUAL and its R-squared is 91.52 points higher. With a Standard Deviation of 15.66, IWR is slightly more volatile than QUAL. The Alpha and Beta of IWR are 2.80 points lower and 1.11 points higher than QUAL’s Alpha and Beta.

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Performance

Annual Returns

IWR vs. QUAL - Annual Returns

YearIWRQUAL
202016.91%16.96%
201930.31%34.14%
2018-9.13%-5.77%
201718.32%22.26%
201613.58%9.18%
2015-2.57%5.56%
201413.03%11.62%
201334.5%0.0%
201217.13%0.0%
2011-1.67%0.0%
201025.25%0.0%

IWR had its best year in 2013 with an annual return of 34.5%. IWR’s worst year over the past decade yielded -9.13% and occurred in 2018. In most years the iShares Russell Mid-Cap ETF provided moderate returns such as in 2016, 2020, and 2012 where annual returns amounted to 13.58%, 16.91%, and 17.13% 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

IWR vs. QUAL - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWR$10,000$20,48714.15%
QUAL$10,000$23,25113.42%

A $10,000 investment in IWR would have resulted in a final balance of $20,487. This is a profit of $10,487 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.15%.

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%.

IWR’s CAGR is 0.73 percentage points higher than that of QUAL and as a result, would have yielded $2,764 less on a $10,000 investment. Thus, IWR outperformed QUAL by 0.73% annually.


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