VEU vs. USMV: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and USMV is a iShares Large Blend fund. So, what’s the difference between VEU and USMV? And which fund is better?

The expense ratio of VEU is 0.07 percentage points lower than USMV’s (0.08% vs. 0.15%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than USMV over the past ten years.

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

Summary

VEU USMV
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares MSCI USA Min Vol Factor ETF
Category Foreign Large Blend Large Blend
Issuer Vanguard iShares
AUM 53.64B 27.6B
Avg. Return 6.64% 13.89%
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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% 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 USMV (2.31% vs. 1.5%). Also, VEU yielded on average 7.26% less per year over the past decade (6.64% vs. 13.89%). The expense ratio of VEU is 0.07 percentage points lower than USMV’s (0.08% vs. 0.15%).

Fund Composition

Industry Exposure

VEU vs. USMV - Industry Exposure

VEU USMV
Technology 12.94% 20.53%
Industrials 12.19% 10.51%
Energy 4.69% 0.21%
Communication Services 7.44% 11.03%
Utilities 2.89% 6.93%
Healthcare 9.34% 18.42%
Consumer Defensive 8.28% 12.82%
Real Estate 3.04% 2.73%
Financial Services 18.46% 9.65%
Consumer Cyclical 12.57% 5.53%
Basic Materials 8.17% 1.65%

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 MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

VEU is 8.81% more exposed to the Financial Services sector than USMV (18.46% vs 9.65%). VEU’s exposure to Technology and Consumer Cyclical stocks is 7.59% lower and 7.04% higher respectively (12.94% vs. 20.53% and 12.57% vs. 5.53%). In total, Real Estate, Energy, and Communication Services also make up 1.20% more of the fund’s holdings compared to USMV (15.17% vs. 13.97%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

Risk Analysis

VEU USMV
Mean Return 0.56 0
R-squared 98.44 0
Std. Deviation 15.08 0
Alpha 0.28 0
Beta 0.99 0
Sharpe Ratio 0.4 0
Treynor Ratio 5.12 0

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Sharpe Ratio of 0 with a Standard Deviation of 0 and a Treynor Ratio of 0. Its Beta is 0 while USMV’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a R-squared of 0.

VEU’s Mean Return is 0.56 points higher than that of USMV and its R-squared is 98.44 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than USMV. The Alpha and Beta of VEU are 0.28 points higher and 0.99 points higher than USMV’s Alpha and Beta.

Performance

Annual Returns

VEU vs. USMV - Annual Returns

Year VEU USMV
2020 11.39% 5.6%
2019 21.63% 27.77%
2018 -13.97% 1.36%
2017 27.27% 18.97%
2016 4.77% 10.5%
2015 -4.67% 5.5%
2014 -4.05% 16.34%
2013 14.5% 25.11%
2012 18.55% 11.04%
2011 -14.25% 0.0%
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

VEU vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $16,277 6.64%
USMV $10,000 $27,607 13.89%

A $10,000 investment in VEU would have resulted in a final balance of $16,277. This is a profit of $6,277 over 8 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

VEU’s CAGR is 7.26 percentage points lower than that of USMV and as a result, would have yielded $11,330 less on a $10,000 investment. Thus, VEU performed worse than USMV by 7.26% annually.


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