The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between VEU and VTIP? And which fund is better?
The expense ratio of VEU is 0.03 percentage points higher than VTIP’s (0.08% vs. 0.05%). VEU also has a high exposure to the financial services sector while VTIP is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare VEU vs. VTIP. We’ll look at portfolio growth and fund composition, as well as at their annual returns and holdings. Moreover, I’ll also discuss VEU’s and VTIP’s industry exposure, performance, and risk metrics and examine how these affect their overall returns.
Summary
| VEU | VTIP | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares |
| Category | Foreign Large Blend | Inflation-Protected Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 53.64B | 50.67B |
| Avg. Return | 6.64% | 1.79% |
| Div. Yield | 2.31% | 1.35% |
| 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 Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
VEU’s dividend yield is 0.96% higher than that of VTIP (2.31% vs. 1.35%). Also, VEU yielded on average 4.85% more per year over the past decade (6.64% vs. 1.79%). The expense ratio of VEU is 0.03 percentage points higher than VTIP’s (0.08% vs. 0.05%).
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%.
| VTIP Bond Sectors | Weight |
| AAA | 99.87% |
| Others | 0.13% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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 | VTIP | |
| 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 Sharpe Ratio of 0.4 with a Mean Return of 0.56 and a Treynor Ratio of 5.12. Its Standard Deviation is 15.08 while VEU’s Alpha is 0.28. Furthermore, the fund has a R-squared of 98.44 and a Beta of 0.99.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Beta of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Mean Return is 0 while VTIP’s Standard Deviation is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.
VEU’s Mean Return is 0.56 points higher than that of VTIP and its R-squared is 98.44 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than VTIP. The Alpha and Beta of VEU are 0.28 points higher and 0.99 points higher than VTIP’s Alpha and Beta.
Performance
Annual Returns
| Year | VEU | VTIP |
| 2020 | 11.39% | 4.97% |
| 2019 | 21.63% | 4.83% |
| 2018 | -13.97% | 0.54% |
| 2017 | 27.27% | 0.82% |
| 2016 | 4.77% | 2.71% |
| 2015 | -4.67% | -0.15% |
| 2014 | -4.05% | -1.17% |
| 2013 | 14.5% | -1.55% |
| 2012 | 18.55% | 0.0% |
| 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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEU | $10,000 | $14,215 | 6.64% |
| VTIP | $10,000 | $11,305 | 1.79% |
A $10,000 investment in VEU would have resulted in a final balance of $14,215. This is a profit of $4,215 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
VEU’s CAGR is 4.85 percentage points higher than that of VTIP and as a result, would have yielded $2,910 more on a $10,000 investment. Thus, VEU outperformed VTIP by 4.85% annually.
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