QUAL vs. VBK: What’s The Difference?

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

The expense ratio of QUAL is 0.08 percentage points higher than VBK’s (0.15% vs. 0.07%). QUAL also has a lower exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided lower returns than VBK over the past 7 years.

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

Summary

QUAL VBK
Name iShares MSCI USA Quality Factor ETF Vanguard Small-Cap Growth Index Fund ETF Shares
Category Large Blend Small Growth
Issuer iShares Vanguard
AUM 23.93B 37.89B
Avg. Return 13.42% 16.53%
Div. Yield 1.29% 0.45%
Expense Ratio 0.15% 0.07%

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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

QUAL’s dividend yield is 0.84% higher than that of VBK (1.29% vs. 0.45%). Also, QUAL yielded on average 3.11% less per year over the past decade (13.42% vs. 16.53%). The expense ratio of QUAL is 0.08 percentage points higher than VBK’s (0.15% vs. 0.07%).

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Fund Composition

Industry Exposure

QUAL vs. VBK - Industry Exposure

QUAL VBK
Technology 22.52% 27.87%
Industrials 9.22% 13.19%
Energy 2.24% 1.77%
Communication Services 11.44% 3.24%
Utilities 2.41% 0.32%
Healthcare 13.22% 23.24%
Consumer Defensive 8.57% 3.83%
Real Estate 2.72% 7.87%
Financial Services 15.87% 4.05%
Consumer Cyclical 9.43% 12.13%
Basic Materials 2.35% 2.49%

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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

QUAL is 5.35% less exposed to the Technology sector than VBK (22.52% vs 27.87%). QUAL’s exposure to Financial Services and Healthcare stocks is 11.82% higher and 10.02% lower respectively (15.87% vs. 4.05% and 13.22% vs. 23.24%). In total, Basic Materials, Utilities, and Real Estate also make up 3.20% less of the fund’s holdings compared to VBK (7.48% vs. 10.68%).

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%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

QUAL VBK
Mean Return 0 1.22
R-squared 0 80.56
Std. Deviation 0 17.95
Alpha 0 -2.81
Beta 0 1.18
Sharpe Ratio 0 0.78
Treynor Ratio 0 11.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Standard Deviation of 17.95 with a Sharpe Ratio of 0.78 and a Beta of 1.18. Its Alpha is -2.81 while VBK’s R-squared is 80.56. Furthermore, the fund has a Mean Return of 1.22 and a Treynor Ratio of 11.18.

QUAL’s Mean Return is 1.22 points lower than that of VBK and its R-squared is 80.56 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than VBK. The Alpha and Beta of QUAL are 2.81 points higher and 1.18 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. VBK - Annual Returns

Year QUAL VBK
2020 16.96% 35.29%
2019 34.14% 32.75%
2018 -5.77% -5.68%
2017 22.26% 21.9%
2016 9.18% 10.74%
2015 5.56% -2.51%
2014 11.62% 4.02%
2013 0.0% 38.18%
2012 0.0% 17.67%
2011 0.0% -1.43%
2010 0.0% 30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

QUAL vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
VBK $10,000 $23,189 16.53%

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 VBK, the end total would have been $23,189. This equates to a $13,189 profit over 7 years and a compound annual growth rate (CAGR) of 16.53%.

QUAL’s CAGR is 3.11 percentage points lower than that of VBK and as a result, would have yielded $62 more on a $10,000 investment. Thus, QUAL performed worse than VBK by 3.11% annually.


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