VEU vs. ACWI: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and ACWI is a iShares N/A fund. So, what’s the difference between VEU and ACWI? And which fund is better?

The expense ratio of VEU is 0.24 percentage points lower than ACWI’s (0.08% vs. 0.32%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than ACWI over the past ten years.

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

Summary

VEU ACWI
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares MSCI ACWI ETF
Category Foreign Large Blend N/A
Issuer Vanguard iShares
AUM 53.64B 16.85B
Avg. Return 6.64% 10.21%
Div. Yield 2.31% 1.39%
Expense Ratio 0.08% 0.32%

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%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

VEU’s dividend yield is 0.92% higher than that of ACWI (2.31% vs. 1.39%). Also, VEU yielded on average 3.58% less per year over the past decade (6.64% vs. 10.21%). The expense ratio of VEU is 0.24 percentage points lower than ACWI’s (0.08% vs. 0.32%).

Fund Composition

Industry Exposure

VEU vs. ACWI - Industry Exposure

VEU ACWI
Technology 12.94% 20.41%
Industrials 12.19% 9.65%
Energy 4.69% 3.48%
Communication Services 7.44% 9.87%
Utilities 2.89% 2.61%
Healthcare 9.34% 11.74%
Consumer Defensive 8.28% 7.15%
Real Estate 3.04% 2.75%
Financial Services 18.46% 15.58%
Consumer Cyclical 12.57% 12.01%
Basic Materials 8.17% 4.73%

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%.

The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.

ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.

VEU is 2.88% more exposed to the Financial Services sector than ACWI (18.46% vs 15.58%). VEU’s exposure to Technology and Consumer Cyclical stocks is 7.47% lower and 0.56% higher respectively (12.94% vs. 20.41% and 12.57% vs. 12.01%). In total, Real Estate, Energy, and Communication Services also make up 0.93% less of the fund’s holdings compared to ACWI (15.17% vs. 16.10%).

Holdings

VEU - Holdings

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%.

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

Risk Analysis

VEU ACWI
Mean Return 0.56 0.89
R-squared 98.44 99.96
Std. Deviation 15.08 14.05
Alpha 0.28 0.15
Beta 0.99 1
Sharpe Ratio 0.4 0.71
Treynor Ratio 5.12 9.45

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Mean Return of 0.56 and a Standard Deviation of 15.08. Its Beta is 0.99 while VEU’s Treynor Ratio is 5.12. Furthermore, the fund has a Alpha of 0.28 and a Sharpe Ratio of 0.4.

The iShares MSCI ACWI ETF (ACWI) has a Beta of 1 with a Alpha of 0.15 and a Sharpe Ratio of 0.71. Its Treynor Ratio is 9.45 while ACWI’s Standard Deviation is 14.05. Furthermore, the fund has a R-squared of 99.96 and a Mean Return of 0.89.

VEU’s Mean Return is 0.33 points lower than that of ACWI and its R-squared is 1.52 points lower. With a Standard Deviation of 15.08, VEU is slightly more volatile than ACWI. The Alpha and Beta of VEU are 0.13 points higher and 0.01 points lower than ACWI’s Alpha and Beta.

Performance

Annual Returns

VEU vs. ACWI - Annual Returns

Year VEU ACWI
2020 11.39% 16.38%
2019 21.63% 26.7%
2018 -13.97% -9.15%
2017 27.27% 24.35%
2016 4.77% 8.22%
2015 -4.67% -2.39%
2014 -4.05% 4.64%
2013 14.5% 22.91%
2012 18.55% 15.99%
2011 -14.25% -7.6%
2010 11.85% 12.31%

VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

VEU vs. ACWI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
ACWI $10,000 $27,241 10.21%

A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.

VEU’s CAGR is 3.58 percentage points lower than that of ACWI and as a result, would have yielded $8,734 less on a $10,000 investment. Thus, VEU performed worse than ACWI by 3.58% annually.


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