The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between VB and VEU? And which fund is better?
The expense ratio of VB is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%). VB also has a higher exposure to the technology sector and a higher standard deviation. Overall, VB has provided higher returns than VEU over the past ten years.
In this article, we’ll compare VB vs. VEU. We’ll look at holdings and industry exposure, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss VB’s and VEU’s performance, portfolio growth, and fund composition and examine how these affect their overall returns.
Summary
| VB | VEU | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | Vanguard FTSE All-World ex-US Index Fund ETF Shares |
| Category | Small Blend | Foreign Large Blend |
| Issuer | Vanguard | Vanguard |
| AUM | 137.72B | 53.64B |
| Avg. Return | 14.25% | 6.64% |
| Div. Yield | 1.14% | 2.31% |
| Expense Ratio | 0.05% | 0.08% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.
VB’s dividend yield is 1.17% lower than that of VEU (1.14% vs. 2.31%). Also, VB yielded on average 7.62% more per year over the past decade (14.25% vs. 6.64%). The expense ratio of VB is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%).
Fund Composition
Industry Exposure
| VB | VEU | |
| Technology | 16.85% | 12.94% |
| Industrials | 16.11% | 12.19% |
| Energy | 3.67% | 4.69% |
| Communication Services | 2.4% | 7.44% |
| Utilities | 2.19% | 2.89% |
| Healthcare | 14.34% | 9.34% |
| Consumer Defensive | 4.14% | 8.28% |
| Real Estate | 9.56% | 3.04% |
| Financial Services | 13.06% | 18.46% |
| Consumer Cyclical | 13.03% | 12.57% |
| Basic Materials | 4.63% | 8.17% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.
VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.
VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.
VB is 3.91% more exposed to the Technology sector than VEU (16.85% vs 12.94%). VB’s exposure to Industrials and Healthcare stocks is 3.92% higher and 5.00% higher respectively (16.11% vs. 12.19% and 14.34% vs. 9.34%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.20% less of the fund’s holdings compared to VEU (10.21% vs. 20.41%).
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| VEU Holdings | Weight |
| Tencent Holdings Ltd | 1.57% |
| Alibaba Group Holding Ltd Ordinary Shares | 1.4% |
| Nestle SA | 1.22% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.98% |
| ASML Holding NV | 0.95% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 0.91% |
| Roche Holding AG | 0.91% |
| Toyota Motor Corp | 0.75% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.68% |
| Novartis AG | 0.67% |
VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.
Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.
Risk Analysis
| VB | VEU | |
| Mean Return | 1.15 | 0.56 |
| R-squared | 85.03 | 98.44 |
| Std. Deviation | 17.82 | 15.08 |
| Alpha | -4.02 | 0.28 |
| Beta | 1.21 | 0.99 |
| Sharpe Ratio | 0.74 | 0.4 |
| Treynor Ratio | 10.15 | 5.12 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Sharpe Ratio of 0.74 with a Standard Deviation of 17.82 and a Alpha of -4.02. Its Beta is 1.21 while VB’s Mean Return is 1.15. Furthermore, the fund has a Treynor Ratio of 10.15 and a R-squared of 85.03.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Mean Return of 0.56 with a R-squared of 98.44 and a Alpha of 0.28. Its Beta is 0.99 while VEU’s Standard Deviation is 15.08. Furthermore, the fund has a Sharpe Ratio of 0.4 and a Treynor Ratio of 5.12.
VB’s Mean Return is 0.59 points higher than that of VEU and its R-squared is 13.41 points lower. With a Standard Deviation of 17.82, VB is slightly more volatile than VEU. The Alpha and Beta of VB are 4.30 points lower and 0.22 points higher than VEU’s Alpha and Beta.
Performance
Annual Returns
| Year | VB | VEU |
| 2020 | 19.08% | 11.39% |
| 2019 | 27.37% | 21.63% |
| 2018 | -9.3% | -13.97% |
| 2017 | 16.24% | 27.27% |
| 2016 | 18.31% | 4.77% |
| 2015 | -3.65% | -4.67% |
| 2014 | 7.51% | -4.05% |
| 2013 | 37.8% | 14.5% |
| 2012 | 18.22% | 18.55% |
| 2011 | -2.68% | -14.25% |
| 2010 | 27.89% | 11.85% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% respectively.
The year 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $39,734 | 14.25% |
| VEU | $10,000 | $18,507 | 6.64% |
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
With a $10,000 investment in VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.
VB’s CAGR is 7.62 percentage points higher than that of VEU and as a result, would have yielded $21,227 more on a $10,000 investment. Thus, VB outperformed VEU by 7.62% annually.
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