The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VEU and TLT? And which fund is better?
The expense ratio of VEU is 0.07 percentage points lower than TLT’s (0.08% vs. 0.15%). VEU also has a high exposure to the financial services sector while TLT is mostly comprised of AAA bonds. Overall, VEU has provided lower returns than TLT over the past ten years.
In this article, we’ll compare VEU vs. TLT. We’ll look at industry exposure and holdings, as well as at their annual returns and performance. Moreover, I’ll also discuss VEU’s and TLT’s fund composition, portfolio growth, and risk metrics and examine how these affect their overall returns.
Summary
| VEU | TLT | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | iShares 20+ Year Treasury Bond ETF |
| Category | Foreign Large Blend | Long Government |
| Issuer | Vanguard | iShares |
| AUM | 53.64B | 15.15B |
| Avg. Return | 6.64% | 9.00% |
| Div. Yield | 2.31% | 1.5% |
| 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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
VEU’s dividend yield is 0.81% higher than that of TLT (2.31% vs. 1.5%). Also, VEU yielded on average 2.36% less per year over the past decade (6.64% vs. 9.00%). The expense ratio of VEU is 0.07 percentage points lower than TLT’s (0.08% vs. 0.15%).
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%.
| TLT 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% |
TLT’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 | TLT | |
| Mean Return | 0.56 | 0.63 |
| R-squared | 98.44 | 68.76 |
| Std. Deviation | 15.08 | 12.76 |
| Alpha | 0.28 | -2.83 |
| Beta | 0.99 | 3.54 |
| Sharpe Ratio | 0.4 | 0.55 |
| Treynor Ratio | 5.12 | 1.82 |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Beta of 0.99 with a Sharpe Ratio of 0.4 and a Treynor Ratio of 5.12. Its Alpha is 0.28 while VEU’s Mean Return is 0.56. Furthermore, the fund has a R-squared of 98.44 and a Standard Deviation of 15.08.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Mean Return of 0.63 with a Standard Deviation of 12.76 and a Treynor Ratio of 1.82. Its Beta is 3.54 while TLT’s R-squared is 68.76. Furthermore, the fund has a Alpha of -2.83 and a Sharpe Ratio of 0.55.
VEU’s Mean Return is 0.07 points lower than that of TLT and its R-squared is 29.68 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than TLT. The Alpha and Beta of VEU are 3.11 points higher and 2.55 points lower than TLT’s Alpha and Beta.
Performance
Annual Returns
| Year | VEU | TLT |
| 2020 | 11.39% | 17.92% |
| 2019 | 21.63% | 14.93% |
| 2018 | -13.97% | -2.07% |
| 2017 | 27.27% | 8.92% |
| 2016 | 4.77% | 1.36% |
| 2015 | -4.67% | -1.65% |
| 2014 | -4.05% | 27.35% |
| 2013 | 14.5% | -13.91% |
| 2012 | 18.55% | 3.25% |
| 2011 | -14.25% | 33.6% |
| 2010 | 11.85% | 9.25% |
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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEU | $10,000 | $18,507 | 6.64% |
| TLT | $10,000 | $23,809 | 9.00% |
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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
VEU’s CAGR is 2.36 percentage points lower than that of TLT and as a result, would have yielded $5,302 less on a $10,000 investment. Thus, VEU performed worse than TLT by 2.36% annually.
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