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QUAL vs. IWS: What’s The Difference?

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

The expense ratio of QUAL is 0.08 percentage points lower than IWS’s (0.15% vs. 0.23%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than IWS over the past 7 years.

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

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Summary

QUALIWS
NameiShares MSCI USA Quality Factor ETFiShares Russell Mid-Cap Value ETF
CategoryLarge BlendMid-Cap Value
IssueriSharesiShares
AUM23.93B14.24B
Avg. Return13.42%12.35%
Div. Yield1.29%1.34%
Expense Ratio0.15%0.23%

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 Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

QUAL’s dividend yield is 0.05% lower than that of IWS (1.29% vs. 1.34%). Also, QUAL yielded on average 1.07% more per year over the past decade (13.42% vs. 12.35%). The expense ratio of QUAL is 0.08 percentage points lower than IWS’s (0.15% vs. 0.23%).

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Fund Composition

Industry Exposure

QUAL vs. IWS - Industry Exposure

QUALIWS
Technology22.52%11.39%
Industrials9.22%14.6%
Energy2.24%4.71%
Communication Services11.44%4.08%
Utilities2.41%6.97%
Healthcare13.22%8.56%
Consumer Defensive8.57%4.76%
Real Estate2.72%11.71%
Financial Services15.87%15.75%
Consumer Cyclical9.43%12.07%
Basic Materials2.35%5.4%

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 Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

QUAL is 11.13% more exposed to the Technology sector than IWS (22.52% vs 11.39%). QUAL’s exposure to Financial Services and Healthcare stocks is 0.12% higher and 4.66% higher respectively (15.87% vs. 15.75% and 13.22% vs. 8.56%). In total, Basic Materials, Utilities, and Real Estate also make up 16.60% less of the fund’s holdings compared to IWS (7.48% vs. 24.08%).

Holdings

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%.

IWS - Holdings

IWS HoldingsWeight
Twitter Inc0.69%
Marvell Technology Inc0.69%
IHS Markit Ltd0.62%
Prudential Financial Inc0.56%
Otis Worldwide Corp Ordinary Shares0.54%
International Flavors & Fragrances Inc0.53%
Xcel Energy Inc0.52%
Motorola Solutions Inc0.52%
Aptiv PLC0.52%
Aflac Inc0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

QUALIWS
Mean Return01.06
R-squared087.04
Std. Deviation016.03
Alpha0-4.11
Beta01.1
Sharpe Ratio00.75
Treynor Ratio010.3

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

The iShares Russell Mid-Cap Value ETF (IWS) has a R-squared of 87.04 with a Treynor Ratio of 10.3 and a Sharpe Ratio of 0.75. Its Standard Deviation is 16.03 while IWS’s Beta is 1.1. Furthermore, the fund has a Alpha of -4.11 and a Mean Return of 1.06.

QUAL’s Mean Return is 1.06 points lower than that of IWS and its R-squared is 87.04 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than IWS. The Alpha and Beta of QUAL are 4.11 points higher and 1.10 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. IWS - Annual Returns

YearQUALIWS
202016.96%4.76%
201934.14%26.78%
2018-5.77%-12.36%
201722.26%13.1%
20169.18%19.69%
20155.56%-4.93%
201411.62%14.49%
20130.0%33.11%
20120.0%18.27%
20110.0%-1.55%
20100.0%24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

QUAL vs. IWS - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
QUAL$10,000$23,25113.42%
IWS$10,000$17,15012.35%

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 IWS, the end total would have been $17,150. This equates to a $7,150 profit over 7 years and a compound annual growth rate (CAGR) of 12.35%.

QUAL’s CAGR is 1.07 percentage points higher than that of IWS and as a result, would have yielded $6,101 more on a $10,000 investment. Thus, QUAL outperformed IWS by 1.07% annually.


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