VEU vs. IWN: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and IWN is a iShares Small Value fund. So, what’s the difference between VEU and IWN? And which fund is better?

The expense ratio of VEU is 0.16 percentage points lower than IWN’s (0.08% vs. 0.24%). VEU also has a lower exposure to the financial services sector and a lower standard deviation. Overall, VEU has provided lower returns than IWN over the past ten years.

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

Summary

VEU IWN
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares Russell 2000 Value ETF
Category Foreign Large Blend Small Value
Issuer Vanguard iShares
AUM 53.64B 15.48B
Avg. Return 6.64% 10.96%
Div. Yield 2.31% 1.26%
Expense Ratio 0.08% 0.24%

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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

VEU’s dividend yield is 1.05% higher than that of IWN (2.31% vs. 1.26%). Also, VEU yielded on average 4.32% less per year over the past decade (6.64% vs. 10.96%). The expense ratio of VEU is 0.16 percentage points lower than IWN’s (0.08% vs. 0.24%).

Fund Composition

Industry Exposure

VEU vs. IWN - Industry Exposure

VEU IWN
Technology 12.94% 6.02%
Industrials 12.19% 14.58%
Energy 4.69% 5.84%
Communication Services 7.44% 4.17%
Utilities 2.89% 4.69%
Healthcare 9.34% 10.94%
Consumer Defensive 8.28% 3.77%
Real Estate 3.04% 14.36%
Financial Services 18.46% 22.97%
Consumer Cyclical 12.57% 8.39%
Basic Materials 8.17% 4.29%

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 Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

VEU is 4.51% less exposed to the Financial Services sector than IWN (18.46% vs 22.97%). VEU’s exposure to Technology and Consumer Cyclical stocks is 6.92% higher and 4.18% higher respectively (12.94% vs. 6.02% and 12.57% vs. 8.39%). In total, Real Estate, Energy, and Communication Services also make up 9.20% less of the fund’s holdings compared to IWN (15.17% vs. 24.37%).

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%.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

Risk Analysis

VEU IWN
Mean Return 0.56 1.01
R-squared 98.44 72.64
Std. Deviation 15.08 19.28
Alpha 0.28 -6.32
Beta 0.99 1.21
Sharpe Ratio 0.4 0.59
Treynor Ratio 5.12 8.3

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 R-squared of 98.44. Its Standard Deviation is 15.08 while VEU’s Alpha is 0.28. Furthermore, the fund has a Mean Return of 0.56 and a Beta of 0.99.

The iShares Russell 2000 Value ETF (IWN) has a Standard Deviation of 19.28 with a Alpha of -6.32 and a Treynor Ratio of 8.3. Its R-squared is 72.64 while IWN’s Sharpe Ratio is 0.59. Furthermore, the fund has a Beta of 1.21 and a Mean Return of 1.01.

VEU’s Mean Return is 0.45 points lower than that of IWN and its R-squared is 25.80 points higher. With a Standard Deviation of 15.08, VEU is slightly less volatile than IWN. The Alpha and Beta of VEU are 6.60 points higher and 0.22 points lower than IWN’s Alpha and Beta.

Performance

Annual Returns

VEU vs. IWN - Annual Returns

Year VEU IWN
2020 11.39% 4.5%
2019 21.63% 22.17%
2018 -13.97% -12.94%
2017 27.27% 7.73%
2016 4.77% 31.64%
2015 -4.67% -7.53%
2014 -4.05% 4.13%
2013 14.5% 34.3%
2012 18.55% 17.92%
2011 -14.25% -5.64%
2010 11.85% 24.29%

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 2013 was the strongest year for IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

VEU vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
IWN $10,000 $28,189 10.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

VEU’s CAGR is 4.32 percentage points lower than that of IWN and as a result, would have yielded $9,682 less on a $10,000 investment. Thus, VEU performed worse than IWN by 4.32% annually.


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