QUAL vs. VLUE: What’s The Difference?

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

QUAL and VLUE have the same expense ratio: 0.15%. QUAL also has a lower exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than VLUE over the past 7 years.

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

Summary

QUAL VLUE
Name iShares MSCI USA Quality Factor ETF iShares MSCI USA Value Factor ETF
Category Large Blend Large Value
Issuer iShares iShares
AUM 23.93B 15.95B
Avg. Return 13.42% 8.91%
Div. Yield 1.29% 1.89%
Expense Ratio 0.15% 0.15%

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 MSCI USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

QUAL’s dividend yield is 0.60% lower than that of VLUE (1.29% vs. 1.89%). Also, QUAL yielded on average 4.51% more per year over the past decade (13.42% vs. 8.91%). QUAL and VLUE have the same expense ratio: 0.15%.

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Fund Composition

Industry Exposure

QUAL vs. VLUE - Industry Exposure

QUAL VLUE
Technology 22.52% 26.89%
Industrials 9.22% 9.14%
Energy 2.24% 2.42%
Communication Services 11.44% 10.39%
Utilities 2.41% 2.68%
Healthcare 13.22% 14.31%
Consumer Defensive 8.57% 7.22%
Real Estate 2.72% 3.19%
Financial Services 15.87% 10.96%
Consumer Cyclical 9.43% 10.66%
Basic Materials 2.35% 2.14%

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 MSCI USA Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.

VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.

QUAL is 4.37% less exposed to the Technology sector than VLUE (22.52% vs 26.89%). QUAL’s exposure to Financial Services and Healthcare stocks is 4.91% higher and 1.09% lower respectively (15.87% vs. 10.96% and 13.22% vs. 14.31%). In total, Basic Materials, Utilities, and Real Estate also make up 0.53% less of the fund’s holdings compared to VLUE (7.48% vs. 8.01%).

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%.

VLUE - Holdings

VLUE Holdings Weight
AT&T Inc 7.13%
Intel Corp 6.14%
General Motors Co 3.19%
Micron Technology Inc 3.14%
Cisco Systems Inc 3.05%
International Business Machines Corp 2.76%
Target Corp 2.38%
Citigroup Inc 2.32%
Ford Motor Co 2.23%
Pfizer Inc 2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

QUAL VLUE
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

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

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

QUAL’s Mean Return is 0.00 points lower than that of VLUE and its R-squared is 0.00 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than VLUE. The Alpha and Beta of QUAL are 0.00 points lower and 0.00 points lower than VLUE’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. VLUE - Annual Returns

Year QUAL VLUE
2020 16.96% -0.32%
2019 34.14% 27.47%
2018 -5.77% -11.18%
2017 22.26% 21.97%
2016 9.18% 15.68%
2015 5.56% -3.54%
2014 11.62% 12.29%
2013 0.0% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

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 2019 was the strongest year for VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

QUAL vs. VLUE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
VLUE $10,000 $17,247 8.91%

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 VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

QUAL’s CAGR is 4.51 percentage points higher than that of VLUE and as a result, would have yielded $6,004 more on a $10,000 investment. Thus, QUAL outperformed VLUE by 4.51% annually.


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