VEU vs. SCHP: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between VEU and SCHP? And which fund is better?

The expense ratio of VEU is 0.03 percentage points higher than SCHP’s (0.08% vs. 0.05%). VEU also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than SCHP over the past ten years.

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

Summary

VEU SCHP
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares Schwab U.S. TIPS ETF
Category Foreign Large Blend Inflation-Protected Bond
Issuer Vanguard Schwab ETFs
AUM 53.64B 18.41B
Avg. Return 6.64% 3.92%
Div. Yield 2.31% 1.97%
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 Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

VEU’s dividend yield is 0.34% higher than that of SCHP (2.31% vs. 1.97%). Also, VEU yielded on average 2.72% more per year over the past decade (6.64% vs. 3.92%). The expense ratio of VEU is 0.03 percentage points higher than SCHP’s (0.08% vs. 0.05%).

Fund Composition

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%.

SCHP - Holdings

SCHP 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%

SCHP’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 SCHP
Mean Return 0.56 0.28
R-squared 98.44 66.16
Std. Deviation 15.08 4.32
Alpha 0.28 -0.5
Beta 0.99 1.17
Sharpe Ratio 0.4 0.64
Treynor Ratio 5.12 2.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Beta of 1.17 with a Alpha of -0.5 and a Standard Deviation of 4.32. Its R-squared is 66.16 while SCHP’s Sharpe Ratio is 0.64. Furthermore, the fund has a Treynor Ratio of 2.31 and a Mean Return of 0.28.

VEU’s Mean Return is 0.28 points higher than that of SCHP and its R-squared is 32.28 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than SCHP. The Alpha and Beta of VEU are 0.78 points higher and 0.18 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

VEU vs. SCHP - Annual Returns

Year VEU SCHP
2020 11.39% 10.94%
2019 21.63% 8.36%
2018 -13.97% -1.31%
2017 27.27% 2.95%
2016 4.77% 4.6%
2015 -4.67% -1.5%
2014 -4.05% 3.56%
2013 14.5% -8.66%
2012 18.55% 6.83%
2011 -14.25% 13.38%
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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

VEU vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $16,546 6.64%
SCHP $10,000 $14,418 3.92%

A $10,000 investment in VEU would have resulted in a final balance of $16,546. This is a profit of $6,546 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

VEU’s CAGR is 2.72 percentage points higher than that of SCHP and as a result, would have yielded $2,128 more on a $10,000 investment. Thus, VEU outperformed SCHP by 2.72% annually.


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