The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VEU and GOVT? And which fund is better?
The expense ratio of VEU is 0.03 percentage points higher than GOVT’s (0.08% vs. 0.05%). VEU also has a high exposure to the financial services sector while GOVT is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare VEU vs. GOVT. We’ll look at industry exposure and portfolio growth, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss VEU’s and GOVT’s holdings, annual returns, and performance and examine how these affect their overall returns.
Summary
| VEU | GOVT | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | iShares U.S. Treasury Bond ETF |
| Category | Foreign Large Blend | Intermediate Government |
| Issuer | Vanguard | iShares |
| AUM | 53.64B | 17.07B |
| Avg. Return | 6.64% | 2.67% |
| Div. Yield | 2.31% | 1.0% |
| Expense Ratio | 0.08% | 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%.
The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
VEU’s dividend yield is 1.31% higher than that of GOVT (2.31% vs. 1.0%). Also, VEU yielded on average 3.96% more per year over the past decade (6.64% vs. 2.67%). The expense ratio of VEU is 0.03 percentage points higher than GOVT’s (0.08% vs. 0.05%).
Fund Composition
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%.
| GOVT Bond Sectors | Weight |
| AAA | 100.0% |
| Others | 0.0% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
Risk Analysis
| VEU | GOVT | |
| Mean Return | 0.56 | 0 |
| R-squared | 98.44 | 0 |
| Std. Deviation | 15.08 | 0 |
| Alpha | 0.28 | 0 |
| Beta | 0.99 | 0 |
| Sharpe Ratio | 0.4 | 0 |
| Treynor Ratio | 5.12 | 0 |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Beta of 0.99 with a Sharpe Ratio of 0.4 and a Alpha of 0.28. Its Standard Deviation is 15.08 while VEU’s Mean Return is 0.56. Furthermore, the fund has a Treynor Ratio of 5.12 and a R-squared of 98.44.
The iShares U.S. Treasury Bond ETF (GOVT) has a Beta of 0 with a Treynor Ratio of 0 and a R-squared of 0. Its Standard Deviation is 0 while GOVT’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a Sharpe Ratio of 0.
VEU’s Mean Return is 0.56 points higher than that of GOVT and its R-squared is 98.44 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than GOVT. The Alpha and Beta of VEU are 0.28 points higher and 0.99 points higher than GOVT’s Alpha and Beta.
Performance
Annual Returns
| Year | VEU | GOVT |
| 2020 | 11.39% | 7.92% |
| 2019 | 21.63% | 6.71% |
| 2018 | -13.97% | 0.74% |
| 2017 | 27.27% | 2.19% |
| 2016 | 4.77% | 0.92% |
| 2015 | -4.67% | 0.76% |
| 2014 | -4.05% | 4.99% |
| 2013 | 14.5% | -2.84% |
| 2012 | 18.55% | 0.0% |
| 2011 | -14.25% | 0.0% |
| 2010 | 11.85% | 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 GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEU | $10,000 | $16,277 | 6.64% |
| GOVT | $10,000 | $12,297 | 2.67% |
A $10,000 investment in VEU would have resulted in a final balance of $16,277. This is a profit of $6,277 over 8 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
VEU’s CAGR is 3.96 percentage points higher than that of GOVT and as a result, would have yielded $3,980 more on a $10,000 investment. Thus, VEU outperformed GOVT by 3.96% annually.
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