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VEU vs. ARKK: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between VEU and ARKK? And which fund is better?

The expense ratio of VEU is 0.67 percentage points lower than ARKK’s (0.08% vs. 0.75%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than ARKK over the past ten years.

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

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Summary

VEUARKK
NameVanguard FTSE All-World ex-US Index Fund ETF SharesARK Innovation ETF
CategoryForeign Large BlendMid-Cap Growth
IssuerVanguardARK ETF Trust
AUM53.64B25.52B
Avg. Return6.64%55.45%
Div. Yield2.31%0.0%
Expense Ratio0.08%0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

VEU’s dividend yield is 2.31% higher than that of ARKK (2.31% vs. 0.0%). Also, VEU yielded on average 48.81% less per year over the past decade (6.64% vs. 55.45%). The expense ratio of VEU is 0.67 percentage points lower than ARKK’s (0.08% vs. 0.75%).

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Fund Composition

Industry Exposure

VEU vs. ARKK - Industry Exposure

VEUARKK
Technology12.94%30.5%
Industrials12.19%2.11%
Energy4.69%0.0%
Communication Services7.44%25.01%
Utilities2.89%0.0%
Healthcare9.34%29.47%
Consumer Defensive8.28%0.93%
Real Estate3.04%0.51%
Financial Services18.46%0.04%
Consumer Cyclical12.57%11.42%
Basic Materials8.17%0.0%

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 ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

VEU is 18.42% more exposed to the Financial Services sector than ARKK (18.46% vs 0.04%). VEU’s exposure to Technology and Consumer Cyclical stocks is 17.56% lower and 1.15% higher respectively (12.94% vs. 30.5% and 12.57% vs. 11.42%). In total, Real Estate, Energy, and Communication Services also make up 10.35% less of the fund’s holdings compared to ARKK (15.17% vs. 25.52%).

Holdings

VEU - Holdings

VEU HoldingsWeight
Tencent Holdings Ltd1.57%
Alibaba Group Holding Ltd Ordinary Shares1.4%
Nestle SA1.22%
Taiwan Semiconductor Manufacturing Co Ltd0.98%
ASML Holding NV0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR0.91%
Roche Holding AG0.91%
Toyota Motor Corp0.75%
LVMH Moet Hennessy Louis Vuitton SE0.68%
Novartis AG0.67%

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%.

ARKK - Holdings

ARKK HoldingsWeight
Tesla Inc9.56%
Roku Inc Class A6.48%
Teladoc Health Inc5.76%
Square Inc A4.37%
Zoom Video Communications Inc4.36%
Shopify Inc A4.27%
Spotify Technology SA3.68%
Twilio Inc A3.66%
Coinbase Global Inc Ordinary Shares – Class A3.65%
Unity Software Inc Ordinary Shares3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

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Risk Analysis

VEUARKK
Mean Return0.560
R-squared98.440
Std. Deviation15.080
Alpha0.280
Beta0.990
Sharpe Ratio0.40
Treynor Ratio5.120

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

The ARK Innovation ETF (ARKK) has a Mean Return of 0 with a Beta of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while ARKK’s Treynor Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

VEU’s Mean Return is 0.56 points higher than that of ARKK and its R-squared is 98.44 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than ARKK. The Alpha and Beta of VEU are 0.28 points higher and 0.99 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

VEU vs. ARKK - Annual Returns

YearVEUARKK
202011.39%152.52%
201921.63%35.73%
2018-13.97%3.58%
201727.27%87.38%
20164.77%-1.96%
2015-4.67%3.76%
2014-4.05%0.0%
201314.5%0.0%
201218.55%0.0%
2011-14.25%0.0%
201011.85%0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

VEU vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VEU$10,000$15,5416.64%
ARKK$10,000$65,21855.45%

A $10,000 investment in VEU would have resulted in a final balance of $15,541. This is a profit of $5,541 over 5 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

VEU’s CAGR is 48.81 percentage points lower than that of ARKK and as a result, would have yielded $49,677 less on a $10,000 investment. Thus, VEU performed worse than ARKK by 48.81% annually.


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