VBR vs. IWS: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between VBR and IWS? And which fund is better?

The expense ratio of VBR is 0.16 percentage points lower than IWS’s (0.07% vs. 0.23%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than IWS over the past 11 years.

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

Summary

VBR IWS
Name Vanguard Small-Cap Value Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Small Value Mid-Cap Value
Issuer Vanguard iShares
AUM 48.08B 14.24B
Avg. Return 12.28% 12.35%
Div. Yield 1.6% 1.34%
Expense Ratio 0.07% 0.23%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

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%.

VBR’s dividend yield is 0.26% higher than that of IWS (1.6% vs. 1.34%). Also, VBR yielded on average 0.07% less per year over the past decade (12.28% vs. 12.35%). The expense ratio of VBR is 0.16 percentage points lower than IWS’s (0.07% vs. 0.23%).

Fund Composition

Industry Exposure

VBR vs. IWS - Industry Exposure

VBR IWS
Technology 8.39% 11.39%
Industrials 18.44% 14.6%
Energy 5.15% 4.71%
Communication Services 1.77% 4.08%
Utilities 3.65% 6.97%
Healthcare 7.16% 8.56%
Consumer Defensive 4.36% 4.76%
Real Estate 10.92% 11.71%
Financial Services 20.04% 15.75%
Consumer Cyclical 13.82% 12.07%
Basic Materials 6.31% 5.4%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

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%.

VBR is 4.29% more exposed to the Financial Services sector than IWS (20.04% vs 15.75%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 3.84% higher and 1.75% higher respectively (18.44% vs. 14.6% and 13.82% vs. 12.07%). In total, Utilities, Consumer Defensive, and Energy also make up 3.28% less of the fund’s holdings compared to IWS (13.16% vs. 16.44%).

Holdings

VBR - Holdings

VBR Holdings Weight
Diamondback Energy Inc 0.55%
VICI Properties Inc Ordinary Shares 0.54%
IDEX Corp 0.54%
Nuance Communications Inc 0.5%
Molina Healthcare Inc 0.48%
Signature Bank 0.46%
Novavax Inc 0.44%
Howmet Aerospace Inc 0.44%
Apollo Global Management Inc Class A 0.42%
Brown & Brown Inc 0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

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%.

Risk Analysis

VBR IWS
Mean Return 1.08 1.06
R-squared 82.2 87.04
Std. Deviation 18.37 16.03
Alpha -5.09 -4.11
Beta 1.23 1.1
Sharpe Ratio 0.67 0.75
Treynor Ratio 9.15 10.3

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Treynor Ratio of 9.15 with a R-squared of 82.2 and a Alpha of -5.09. Its Sharpe Ratio is 0.67 while VBR’s Standard Deviation is 18.37. Furthermore, the fund has a Beta of 1.23 and a Mean Return of 1.08.

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

VBR’s Mean Return is 0.02 points higher than that of IWS and its R-squared is 4.84 points lower. With a Standard Deviation of 18.37, VBR is slightly more volatile than IWS. The Alpha and Beta of VBR are 0.98 points lower and 0.13 points higher than IWS’s Alpha and Beta.

Performance

Annual Returns

VBR vs. IWS - Annual Returns

Year VBR IWS
2020 5.82% 4.76%
2019 22.76% 26.78%
2018 -12.22% -12.36%
2017 11.79% 13.1%
2016 24.8% 19.69%
2015 -4.67% -4.93%
2014 10.55% 14.49%
2013 36.57% 33.11%
2012 18.78% 18.27%
2011 -4.05% -1.55%
2010 24.97% 24.46%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% 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

VBR vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VBR $10,000 $32,611 12.28%
IWS $10,000 $33,083 12.35%

A $10,000 investment in VBR would have resulted in a final balance of $32,611. This is a profit of $22,611 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

With a $10,000 investment in IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

VBR’s CAGR is 0.07 percentage points lower than that of IWS and as a result, would have yielded $472 less on a $10,000 investment. Thus, VBR performed worse than IWS by 0.07% annually.


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