QUAL vs. IWP: What’s The Difference?

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

The expense ratio of QUAL is 0.09 percentage points lower than IWP’s (0.15% vs. 0.24%). QUAL also has a lower exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided lower returns than IWP over the past 7 years.

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

Summary

QUAL IWP
Name iShares MSCI USA Quality Factor ETF iShares Russell Mid-Cap Growth ETF
Category Large Blend Mid-Cap Growth
Issuer iShares iShares
AUM 23.93B 15.7B
Avg. Return 13.42% 16.75%
Div. Yield 1.29% 0.26%
Expense Ratio 0.15% 0.24%

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%.

The iShares Russell Mid-Cap Growth ETF (IWP) is a Mid-Cap Growth fund that is issued by iShares. It currently has 15.7B total assets under management and has yielded an average annual return of 16.75% over the past 10 years. The fund has a dividend yield of 0.26% with an expense ratio of 0.24%.

QUAL’s dividend yield is 1.03% higher than that of IWP (1.29% vs. 0.26%). Also, QUAL yielded on average 3.33% less per year over the past decade (13.42% vs. 16.75%). The expense ratio of QUAL is 0.09 percentage points lower than IWP’s (0.15% vs. 0.24%).

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Fund Composition

Industry Exposure

QUAL vs. IWP - Industry Exposure

QUAL IWP
Technology 22.52% 33.88%
Industrials 9.22% 14.09%
Energy 2.24% 1.51%
Communication Services 11.44% 6.32%
Utilities 2.41% 0.16%
Healthcare 13.22% 16.79%
Consumer Defensive 8.57% 2.32%
Real Estate 2.72% 2.46%
Financial Services 15.87% 4.52%
Consumer Cyclical 9.43% 16.09%
Basic Materials 2.35% 1.86%

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%.

The iShares Russell Mid-Cap Growth ETF (IWP) has the most exposure to the Technology sector at 33.88%. This is followed by Healthcare and Consumer Cyclical at 16.79% and 16.09% respectively. Energy (1.51%), Basic Materials (1.86%), and Consumer Defensive (2.32%) only make up 5.69% of the fund’s total assets.

IWP’s mid-section with moderate exposure is comprised of Real Estate, Financial Services, Communication Services, Industrials, and Consumer Cyclical stocks at 2.46%, 4.52%, 6.32%, 14.09%, and 16.09%.

QUAL is 11.36% less exposed to the Technology sector than IWP (22.52% vs 33.88%). QUAL’s exposure to Financial Services and Healthcare stocks is 11.35% higher and 3.57% lower respectively (15.87% vs. 4.52% and 13.22% vs. 16.79%). In total, Basic Materials, Utilities, and Real Estate also make up 3.00% more of the fund’s holdings compared to IWP (7.48% vs. 4.48%).

Holdings

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%.

IWP - Holdings

IWP Holdings Weight
IDEXX Laboratories Inc 1.3%
DocuSign Inc 1.3%
Roku Inc Class A 1.29%
Match Group Inc 1.06%
Chipotle Mexican Grill Inc 1.06%
Pinterest Inc 1.05%
Veeva Systems Inc Class A 1.04%
Palantir Technologies Inc Ordinary Shares – Class A 1.04%
Lululemon Athletica Inc 1.01%
DexCom Inc 1.0%

IWP’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Roku Inc Class A, Match Group Inc, and Chipotle Mexican Grill Inc at 1.3%, 1.3%, 1.29%, 1.06%, and 1.06%.

Pinterest Inc (1.05%), Veeva Systems Inc Class A (1.04%), and Palantir Technologies Inc Ordinary Shares – Class A (1.04%) have a slightly smaller but still significant weight. Lululemon Athletica Inc and DexCom Inc are also represented in the IWP’s holdings at 1.01% and 1.0%.

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Risk Analysis

QUAL IWP
Mean Return 0 1.27
R-squared 0 87.01
Std. Deviation 0 16.05
Alpha 0 -1.03
Beta 0 1.1
Sharpe Ratio 0 0.91
Treynor Ratio 0 12.98

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

The iShares Russell Mid-Cap Growth ETF (IWP) has a Mean Return of 1.27 with a Treynor Ratio of 12.98 and a Beta of 1.1. Its Sharpe Ratio is 0.91 while IWP’s R-squared is 87.01. Furthermore, the fund has a Standard Deviation of 16.05 and a Alpha of -1.03.

QUAL’s Mean Return is 1.27 points lower than that of IWP and its R-squared is 87.01 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than IWP. The Alpha and Beta of QUAL are 1.03 points higher and 1.10 points lower than IWP’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. IWP - Annual Returns

Year QUAL IWP
2020 16.96% 35.29%
2019 34.14% 35.14%
2018 -5.77% -4.95%
2017 22.26% 24.98%
2016 9.18% 7.15%
2015 5.56% -0.39%
2014 11.62% 11.68%
2013 0.0% 35.44%
2012 0.0% 15.62%
2011 0.0% -1.82%
2010 0.0% 26.1%

QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% respectively.

The year 2013 was the strongest year for IWP, returning 35.44% on an annual basis. The poorest year for IWP in the last ten years was 2018, with a yield of -4.95%. Most years the iShares Russell Mid-Cap Growth ETF has given investors modest returns, such as in 2014, 2012, and 2017, when gains were 11.68%, 15.62%, and 24.98% respectively.

Portfolio Growth

QUAL vs. IWP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
IWP $10,000 $25,888 16.75%

A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.

With a $10,000 investment in IWP, the end total would have been $25,888. This equates to a $15,888 profit over 7 years and a compound annual growth rate (CAGR) of 16.75%.

QUAL’s CAGR is 3.33 percentage points lower than that of IWP and as a result, would have yielded $2,637 less on a $10,000 investment. Thus, QUAL performed worse than IWP by 3.33% annually.


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