The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and ACWI is a iShares N/A fund. So, what’s the difference between VNQ and ACWI? And which fund is better?
The expense ratio of VNQ is 0.20 percentage points lower than ACWI’s (0.12% vs. 0.32%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided higher returns than ACWI over the past ten years.
In this article, we’ll compare VNQ vs. ACWI. We’ll look at portfolio growth and holdings, as well as at their annual returns and fund composition. Moreover, I’ll also discuss VNQ’s and ACWI’s risk metrics, performance, and industry exposure and examine how these affect their overall returns.
Summary
| VNQ | ACWI | |
| Name | Vanguard Real Estate Index Fund ETF Shares | iShares MSCI ACWI ETF |
| Category | Real Estate | N/A |
| Issuer | Vanguard | iShares |
| AUM | 77.34B | 16.85B |
| Avg. Return | 11.05% | 10.21% |
| Div. Yield | 2.34% | 1.39% |
| Expense Ratio | 0.12% | 0.32% |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
VNQ’s dividend yield is 0.95% higher than that of ACWI (2.34% vs. 1.39%). Also, VNQ yielded on average 0.83% more per year over the past decade (11.05% vs. 10.21%). The expense ratio of VNQ is 0.20 percentage points lower than ACWI’s (0.12% vs. 0.32%).
Fund Composition
Industry Exposure
| VNQ | ACWI | |
| Technology | 0.0% | 20.41% |
| Industrials | 0.0% | 9.65% |
| Energy | 0.0% | 3.48% |
| Communication Services | 0.0% | 9.87% |
| Utilities | 0.0% | 2.61% |
| Healthcare | 0.0% | 11.74% |
| Consumer Defensive | 0.0% | 7.15% |
| Real Estate | 100.0% | 2.75% |
| Financial Services | 0.0% | 15.58% |
| Consumer Cyclical | 0.0% | 12.01% |
| Basic Materials | 0.0% | 4.73% |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
VNQ’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.
ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.
VNQ is 97.25% more exposed to the Real Estate sector than ACWI (100.0% vs 2.75%). VNQ’s exposure to Technology and Industrials stocks is 20.41% lower and 9.65% lower respectively (0.0% vs. 20.41% and 0.0% vs. 9.65%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 34.74% less of the fund’s holdings compared to ACWI (0.00% vs. 34.74%).
Holdings
| VNQ Holdings | Weight |
| Vanguard Real Estate II Index | 11.62% |
| American Tower Corp | 7.24% |
| Prologis Inc | 5.33% |
| Crown Castle International Corp | 5.01% |
| Equinix Inc | 4.3% |
| Public Storage | 2.85% |
| Simon Property Group Inc | 2.52% |
| Digital Realty Trust Inc | 2.49% |
| SBA Communications Corp | 2.1% |
| Welltower Inc | 2.09% |
VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.
Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.
| ACWI Holdings | Weight |
| Apple Inc | 3.44% |
| Microsoft Corp | 2.91% |
| Amazon.com Inc | 2.21% |
| Facebook Inc A | 1.25% |
| Alphabet Inc Class C | 1.12% |
| Alphabet Inc A | 1.09% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.79% |
| Tesla Inc | 0.78% |
| NVIDIA Corp | 0.74% |
| JPMorgan Chase & Co | 0.71% |
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
Risk Analysis
| VNQ | ACWI | |
| Mean Return | 0.89 | 0.89 |
| R-squared | 44.4 | 99.96 |
| Std. Deviation | 16.13 | 14.05 |
| Alpha | 2.47 | 0.15 |
| Beta | 0.76 | 1 |
| Sharpe Ratio | 0.62 | 0.71 |
| Treynor Ratio | 11.9 | 9.45 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Beta of 0.76 with a Mean Return of 0.89 and a R-squared of 44.4. Its Treynor Ratio is 11.9 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Standard Deviation of 16.13 and a Sharpe Ratio of 0.62.
The iShares MSCI ACWI ETF (ACWI) has a Treynor Ratio of 9.45 with a Sharpe Ratio of 0.71 and a Standard Deviation of 14.05. Its Beta is 1 while ACWI’s Alpha is 0.15. Furthermore, the fund has a R-squared of 99.96 and a Mean Return of 0.89.
VNQ’s Mean Return is 0.00 points lower than that of ACWI and its R-squared is 55.56 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than ACWI. The Alpha and Beta of VNQ are 2.32 points higher and 0.24 points lower than ACWI’s Alpha and Beta.
Performance
Annual Returns
| Year | VNQ | ACWI |
| 2020 | -4.72% | 16.38% |
| 2019 | 28.91% | 26.7% |
| 2018 | -5.95% | -9.15% |
| 2017 | 4.95% | 24.35% |
| 2016 | 8.53% | 8.22% |
| 2015 | 2.37% | -2.39% |
| 2014 | 30.29% | 4.64% |
| 2013 | 2.42% | 22.91% |
| 2012 | 17.67% | 15.99% |
| 2011 | 8.62% | -7.6% |
| 2010 | 28.44% | 12.31% |
VNQ had its best year in 2014 with an annual return of 30.29%. VNQ’s worst year over the past decade yielded -5.95% and occurred in 2018. In most years the Vanguard Real Estate Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 4.95%, 8.53%, and 8.62% respectively.
The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| ACWI | $10,000 | $27,241 | 10.21% |
A $10,000 investment in VNQ would have resulted in a final balance of $29,506. This is a profit of $19,506 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.
VNQ’s CAGR is 0.83 percentage points higher than that of ACWI and as a result, would have yielded $2,265 more on a $10,000 investment. Thus, VNQ outperformed ACWI by 0.83% annually.
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