The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between VNQ and EFV? And which fund is better?
The expense ratio of VNQ is 0.27 percentage points lower than EFV’s (0.12% vs. 0.39%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided higher returns than EFV over the past ten years.
In this article, we’ll compare VNQ vs. EFV. We’ll look at risk metrics and annual returns, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss VNQ’s and EFV’s performance, portfolio growth, and holdings and examine how these affect their overall returns.
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|Name||Vanguard Real Estate Index Fund ETF Shares||iShares MSCI EAFE Value ETF|
|Category||Real Estate||Foreign Large Value|
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 EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.
VNQ’s dividend yield is 0.60% lower than that of EFV (2.34% vs. 2.94%). Also, VNQ yielded on average 7.05% more per year over the past decade (11.05% vs. 3.99%). The expense ratio of VNQ is 0.27 percentage points lower than EFV’s (0.12% vs. 0.39%).
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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 EAFE Value ETF (EFV) has the most exposure to the Financial Services sector at 26.55%. This is followed by Industrials and Basic Materials at 11.6% and 9.59% respectively. Real Estate (5.06%), Utilities (6.14%), and Communication Services (6.46%) only make up 17.66% of the fund’s total assets.
EFV’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Consumer Cyclical, Healthcare, and Basic Materials stocks at 6.6%, 6.82%, 9.0%, 9.19%, and 9.59%.
VNQ is 94.94% more exposed to the Real Estate sector than EFV (100.0% vs 5.06%). VNQ’s exposure to Technology and Industrials stocks is 2.98% lower and 11.60% lower respectively (0.0% vs. 2.98% and 0.0% vs. 11.6%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 42.37% less of the fund’s holdings compared to EFV (0.00% vs. 42.37%).
|Vanguard Real Estate II Index||11.62%|
|American Tower Corp||7.24%|
|Crown Castle International Corp||5.01%|
|Simon Property Group Inc||2.52%|
|Digital Realty Trust Inc||2.49%|
|SBA Communications Corp||2.1%|
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%.
|Toyota Motor Corp||2.21%|
|Commonwealth Bank of Australia||1.59%|
|HSBC Holdings PLC||1.4%|
|Rio Tinto PLC||1.1%|
EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.
HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Treynor Ratio of 11.9 with a Beta of 0.76 and a Alpha of 2.47. Its R-squared is 44.4 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 16.13 and a Mean Return of 0.89.
The iShares MSCI EAFE Value ETF (EFV) has a Alpha of -1.77 with a Mean Return of 0.42 and a Treynor Ratio of 2.92. Its Standard Deviation is 16.53 while EFV’s R-squared is 92.15. Furthermore, the fund has a Sharpe Ratio of 0.26 and a Beta of 1.05.
VNQ’s Mean Return is 0.47 points higher than that of EFV and its R-squared is 47.75 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than EFV. The Alpha and Beta of VNQ are 4.24 points higher and 0.29 points lower than EFV’s Alpha and Beta.
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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 2013 was the strongest year for EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.
VNQ’s CAGR is 7.05 percentage points higher than that of EFV and as a result, would have yielded $15,372 more on a $10,000 investment. Thus, VNQ outperformed EFV by 7.05% annually.
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