VEU vs. IAU: What’s The Difference?

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

The expense ratio of VEU is 0.17 percentage points lower than IAU’s (0.08% vs. 0.25%). VEU also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VEU has provided higher returns than IAU over the past ten years.

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

Summary

VEU IAU
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares Gold Trust
Category Foreign Large Blend N/A
Issuer Vanguard iShares
AUM 53.64B 28.61B
Avg. Return 6.64% 6.03%
Div. Yield 2.31% 0.0%
Expense Ratio 0.08% 0.25%

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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

VEU’s dividend yield is 2.31% higher than that of IAU (2.31% vs. 0.0%). Also, VEU yielded on average 0.61% more per year over the past decade (6.64% vs. 6.03%). The expense ratio of VEU is 0.17 percentage points lower than IAU’s (0.08% vs. 0.25%).

Fund Composition

Industry Exposure

VEU vs. IAU - Industry Exposure

VEU IAU
Technology 12.94% 0.0%
Industrials 12.19% 0.0%
Energy 4.69% 0.0%
Communication Services 7.44% 0.0%
Utilities 2.89% 0.0%
Healthcare 9.34% 0.0%
Consumer Defensive 8.28% 0.0%
Real Estate 3.04% 0.0%
Financial Services 18.46% 0.0%
Consumer Cyclical 12.57% 0.0%
Basic Materials 8.17% 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 iShares Gold Trust (IAU) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

IAU’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VEU is 18.46% more exposed to the Financial Services sector than IAU (18.46% vs 0.0%). VEU’s exposure to Technology and Consumer Cyclical stocks is 12.94% higher and 12.57% higher respectively (12.94% vs. 0.0% and 12.57% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 15.17% more of the fund’s holdings compared to IAU (15.17% vs. 0.00%).

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%.

IAU - Holdings

IAU Holdings Weight
Gold 100.0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

Risk Analysis

VEU IAU
Mean Return 0.56 0.23
R-squared 98.44 16.03
Std. Deviation 15.08 16.97
Alpha 0.28 4.16
Beta 0.99 0.48
Sharpe Ratio 0.4 0.13
Treynor Ratio 5.12 1.5

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

The iShares Gold Trust (IAU) has a Standard Deviation of 16.97 with a Sharpe Ratio of 0.13 and a R-squared of 16.03. Its Treynor Ratio is 1.5 while IAU’s Beta is 0.48. Furthermore, the fund has a Alpha of 4.16 and a Mean Return of 0.23.

VEU’s Mean Return is 0.33 points higher than that of IAU and its R-squared is 82.41 points higher. With a Standard Deviation of 15.08, VEU is slightly less volatile than IAU. The Alpha and Beta of VEU are 3.88 points lower and 0.51 points higher than IAU’s Alpha and Beta.

Performance

Annual Returns

VEU vs. IAU - Annual Returns

Year VEU IAU
2020 11.39% 23.86%
2019 21.63% 18.54%
2018 -13.97% -1.39%
2017 27.27% 11.58%
2016 4.77% 8.85%
2015 -4.67% -11.65%
2014 -4.05% -0.44%
2013 14.5% -27.96%
2012 18.55% 8.37%
2011 -14.25% 8.66%
2010 11.85% 27.93%

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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.

Portfolio Growth

VEU vs. IAU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
IAU $10,000 $16,786 6.03%

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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.

VEU’s CAGR is 0.61 percentage points higher than that of IAU and as a result, would have yielded $1,721 more on a $10,000 investment. Thus, VEU outperformed IAU by 0.61% annually.


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