The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between VEU and SHY? And which fund is better?
The expense ratio of VEU is 0.07 percentage points lower than SHY’s (0.08% vs. 0.15%). VEU also has a high exposure to the financial services sector while SHY is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than SHY over the past ten years.
In this article, we’ll compare VEU vs. SHY. We’ll look at holdings and portfolio growth, as well as at their annual returns and performance. Moreover, I’ll also discuss VEU’s and SHY’s industry exposure, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||Vanguard FTSE All-World ex-US Index Fund ETF Shares||iShares 1-3 Year Treasury Bond ETF|
|Category||Foreign Large Blend||Short Government|
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
VEU’s dividend yield is 1.85% higher than that of SHY (2.31% vs. 0.46%). Also, VEU yielded on average 5.36% more per year over the past decade (6.64% vs. 1.27%). The expense ratio of VEU is 0.07 percentage points lower than SHY’s (0.08% vs. 0.15%).
|Tencent Holdings Ltd||1.57%|
|Alibaba Group Holding Ltd Ordinary Shares||1.4%|
|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%|
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%.
|SHY Bond Sectors||Weight|
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Mean Return of 0.56 with a R-squared of 98.44 and a Treynor Ratio of 5.12. Its Standard Deviation is 15.08 while VEU’s Sharpe Ratio is 0.4. Furthermore, the fund has a Beta of 0.99 and a Alpha of 0.28.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Standard Deviation of 0.89 with a Sharpe Ratio of 0.54 and a Alpha of -0.03. Its Treynor Ratio is 2.6 while SHY’s Mean Return is 0.09. Furthermore, the fund has a Beta of 0.18 and a R-squared of 39.11.
VEU’s Mean Return is 0.47 points higher than that of SHY and its R-squared is 59.33 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than SHY. The Alpha and Beta of VEU are 0.31 points higher and 0.81 points higher than SHY’s Alpha and Beta.
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 2019 was the strongest year for SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.
VEU’s CAGR is 5.36 percentage points higher than that of SHY and as a result, would have yielded $7,021 more on a $10,000 investment. Thus, VEU outperformed SHY by 5.36% annually.
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