The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VBR and QUAL? And which fund is better?
The expense ratio of VBR is 0.08 percentage points lower than QUAL’s (0.07% vs. 0.15%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than QUAL over the past 7 years.
In this article, we’ll compare VBR vs. QUAL. We’ll look at performance and holdings, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss VBR’s and QUAL’s risk metrics, industry exposure, and fund composition and examine how these affect their overall returns.
Summary
| VBR | QUAL | |
| Name | Vanguard Small-Cap Value Index Fund ETF Shares | iShares MSCI USA Quality Factor ETF |
| Category | Small Value | Large Blend |
| Issuer | Vanguard | iShares |
| AUM | 48.08B | 23.93B |
| Avg. Return | 12.28% | 13.42% |
| Div. Yield | 1.6% | 1.29% |
| Expense Ratio | 0.07% | 0.15% |
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 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%.
VBR’s dividend yield is 0.31% higher than that of QUAL (1.6% vs. 1.29%). Also, VBR yielded on average 1.14% less per year over the past decade (12.28% vs. 13.42%). The expense ratio of VBR is 0.08 percentage points lower than QUAL’s (0.07% vs. 0.15%).
Fund Composition
Industry Exposure
| VBR | QUAL | |
| Technology | 8.39% | 22.52% |
| Industrials | 18.44% | 9.22% |
| Energy | 5.15% | 2.24% |
| Communication Services | 1.77% | 11.44% |
| Utilities | 3.65% | 2.41% |
| Healthcare | 7.16% | 13.22% |
| Consumer Defensive | 4.36% | 8.57% |
| Real Estate | 10.92% | 2.72% |
| Financial Services | 20.04% | 15.87% |
| Consumer Cyclical | 13.82% | 9.43% |
| Basic Materials | 6.31% | 2.35% |
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 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%.
VBR is 4.17% more exposed to the Financial Services sector than QUAL (20.04% vs 15.87%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 9.22% higher and 4.39% higher respectively (18.44% vs. 9.22% and 13.82% vs. 9.43%). In total, Utilities, Consumer Defensive, and Energy also make up 0.06% less of the fund’s holdings compared to QUAL (13.16% vs. 13.22%).
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%.
| 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%.
Risk Analysis
| VBR | QUAL | |
| Mean Return | 1.08 | 0 |
| R-squared | 82.2 | 0 |
| Std. Deviation | 18.37 | 0 |
| Alpha | -5.09 | 0 |
| Beta | 1.23 | 0 |
| Sharpe Ratio | 0.67 | 0 |
| Treynor Ratio | 9.15 | 0 |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Alpha of -5.09 with a Standard Deviation of 18.37 and a Beta of 1.23. Its R-squared is 82.2 while VBR’s Treynor Ratio is 9.15. Furthermore, the fund has a Mean Return of 1.08 and a Sharpe Ratio of 0.67.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Standard Deviation of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Alpha is 0 while QUAL’s Beta is 0. Furthermore, the fund has a Mean Return of 0 and a Sharpe Ratio of 0.
VBR’s Mean Return is 1.08 points higher than that of QUAL and its R-squared is 82.20 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than QUAL. The Alpha and Beta of VBR are 5.09 points lower and 1.23 points higher than QUAL’s Alpha and Beta.
Performance
Annual Returns
| Year | VBR | QUAL |
| 2020 | 5.82% | 16.96% |
| 2019 | 22.76% | 34.14% |
| 2018 | -12.22% | -5.77% |
| 2017 | 11.79% | 22.26% |
| 2016 | 24.8% | 9.18% |
| 2015 | -4.67% | 5.56% |
| 2014 | 10.55% | 11.62% |
| 2013 | 36.57% | 0.0% |
| 2012 | 18.78% | 0.0% |
| 2011 | -4.05% | 0.0% |
| 2010 | 24.97% | 0.0% |
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 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VBR | $10,000 | $16,765 | 12.28% |
| QUAL | $10,000 | $23,251 | 13.42% |
A $10,000 investment in VBR would have resulted in a final balance of $16,765. This is a profit of $6,765 over 7 years and amounts to a compound annual growth rate (CAGR) of 12.28%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
VBR’s CAGR is 1.14 percentage points lower than that of QUAL and as a result, would have yielded $6,486 less on a $10,000 investment. Thus, VBR performed worse than QUAL by 1.14% annually.
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