The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VEU and IEF? And which fund is better?
The expense ratio of VEU is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%). VEU also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VEU vs. IEF. We’ll look at holdings and industry exposure, as well as at their risk metrics and performance. Moreover, I’ll also discuss VEU’s and IEF’s fund composition, portfolio growth, and annual returns and examine how these affect their overall returns.
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Summary
| VEU | IEF | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | iShares 7-10 Year Treasury Bond ETF |
| Category | Foreign Large Blend | Long Government |
| Issuer | Vanguard | iShares |
| AUM | 53.64B | 13.44B |
| Avg. Return | 6.64% | 5.06% |
| Div. Yield | 2.31% | 0.84% |
| Expense Ratio | 0.08% | 0.15% |
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VEU’s dividend yield is 1.47% higher than that of IEF (2.31% vs. 0.84%). Also, VEU yielded on average 1.58% more per year over the past decade (6.64% vs. 5.06%). The expense ratio of VEU is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%).
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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%.
| IEF 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% |
IEF’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 | IEF | |
| Mean Return | 0.56 | 0.32 |
| R-squared | 98.44 | 77.56 |
| Std. Deviation | 15.08 | 5.42 |
| Alpha | 0.28 | -1.2 |
| Beta | 0.99 | 1.59 |
| Sharpe Ratio | 0.4 | 0.6 |
| Treynor Ratio | 5.12 | 1.97 |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Sharpe Ratio of 0.4 with a R-squared of 98.44 and a Standard Deviation of 15.08. Its Mean Return is 0.56 while VEU’s Beta is 0.99. Furthermore, the fund has a Alpha of 0.28 and a Treynor Ratio of 5.12.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Mean Return of 0.32 and a Beta of 1.59. Its Alpha is -1.2 while IEF’s Sharpe Ratio is 0.6. Furthermore, the fund has a R-squared of 77.56 and a Standard Deviation of 5.42.
VEU’s Mean Return is 0.24 points higher than that of IEF and its R-squared is 20.88 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than IEF. The Alpha and Beta of VEU are 1.48 points higher and 0.60 points lower than IEF’s Alpha and Beta.
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Performance
Annual Returns
| Year | VEU | IEF |
| 2020 | 11.39% | 9.84% |
| 2019 | 21.63% | 8.38% |
| 2018 | -13.97% | 0.82% |
| 2017 | 27.27% | 2.47% |
| 2016 | 4.77% | 1.0% |
| 2015 | -4.67% | 1.55% |
| 2014 | -4.05% | 8.92% |
| 2013 | 14.5% | -6.12% |
| 2012 | 18.55% | 4.06% |
| 2011 | -14.25% | 15.46% |
| 2010 | 11.85% | 9.29% |
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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEU | $10,000 | $18,507 | 6.64% |
| IEF | $10,000 | $16,936 | 5.06% |
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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
VEU’s CAGR is 1.58 percentage points higher than that of IEF and as a result, would have yielded $1,571 more on a $10,000 investment. Thus, VEU outperformed IEF by 1.58% annually.
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