The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IWN is a iShares Small Value fund. So, what’s the difference between VNQ and IWN? And which fund is better?
The expense ratio of VNQ is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%). VNQ also has a higher exposure to the real estate sector and a lower standard deviation. Overall, VNQ has provided higher returns than IWN over the past ten years.
In this article, we’ll compare VNQ vs. IWN. We’ll look at fund composition and risk metrics, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss VNQ’s and IWN’s holdings, performance, and annual returns and examine how these affect their overall returns.
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Summary
| VNQ | IWN | |
| Name | Vanguard Real Estate Index Fund ETF Shares | iShares Russell 2000 Value ETF |
| Category | Real Estate | Small Value |
| Issuer | Vanguard | iShares |
| AUM | 77.34B | 15.48B |
| Avg. Return | 11.05% | 10.96% |
| Div. Yield | 2.34% | 1.26% |
| Expense Ratio | 0.12% | 0.24% |
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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.
VNQ’s dividend yield is 1.08% higher than that of IWN (2.34% vs. 1.26%). Also, VNQ yielded on average 0.09% more per year over the past decade (11.05% vs. 10.96%). The expense ratio of VNQ is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).
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Fund Composition
Industry Exposure
| VNQ | IWN | |
| Technology | 0.0% | 6.02% |
| Industrials | 0.0% | 14.58% |
| Energy | 0.0% | 5.84% |
| Communication Services | 0.0% | 4.17% |
| Utilities | 0.0% | 4.69% |
| Healthcare | 0.0% | 10.94% |
| Consumer Defensive | 0.0% | 3.77% |
| Real Estate | 100.0% | 14.36% |
| Financial Services | 0.0% | 22.97% |
| Consumer Cyclical | 0.0% | 8.39% |
| Basic Materials | 0.0% | 4.29% |
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 Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.
IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.
VNQ is 85.64% more exposed to the Real Estate sector than IWN (100.0% vs 14.36%). VNQ’s exposure to Technology and Industrials stocks is 6.02% lower and 14.58% lower respectively (0.0% vs. 6.02% and 0.0% vs. 14.58%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 35.13% less of the fund’s holdings compared to IWN (0.00% vs. 35.13%).
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%.
| IWN Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 1.06% |
| Tenet Healthcare Corp | 0.47% |
| Stag Industrial Inc | 0.47% |
| Ovintiv Inc | 0.45% |
| EMCOR Group Inc | 0.42% |
| Valley National Bancorp | 0.37% |
| Chesapeake Energy Corp Ordinary Shares – New | 0.37% |
| Agree Realty Corp | 0.36% |
| Macy’s Inc | 0.35% |
| Essent Group Ltd | 0.35% |
IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.
Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.
Risk Analysis
| VNQ | IWN | |
| Mean Return | 0.89 | 1.01 |
| R-squared | 44.4 | 72.64 |
| Std. Deviation | 16.13 | 19.28 |
| Alpha | 2.47 | -6.32 |
| Beta | 0.76 | 1.21 |
| Sharpe Ratio | 0.62 | 0.59 |
| Treynor Ratio | 11.9 | 8.3 |
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Standard Deviation of 16.13 with a Sharpe Ratio of 0.62 and a Treynor Ratio of 11.9. Its Mean Return is 0.89 while VNQ’s Alpha is 2.47. Furthermore, the fund has a Beta of 0.76 and a R-squared of 44.4.
The iShares Russell 2000 Value ETF (IWN) has a Sharpe Ratio of 0.59 with a R-squared of 72.64 and a Standard Deviation of 19.28. Its Mean Return is 1.01 while IWN’s Beta is 1.21. Furthermore, the fund has a Alpha of -6.32 and a Treynor Ratio of 8.3.
VNQ’s Mean Return is 0.12 points lower than that of IWN and its R-squared is 28.24 points lower. With a Standard Deviation of 16.13, VNQ is slightly less volatile than IWN. The Alpha and Beta of VNQ are 8.79 points higher and 0.45 points lower than IWN’s Alpha and Beta.
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Performance
Annual Returns
| Year | VNQ | IWN |
| 2020 | -4.72% | 4.5% |
| 2019 | 28.91% | 22.17% |
| 2018 | -5.95% | -12.94% |
| 2017 | 4.95% | 7.73% |
| 2016 | 8.53% | 31.64% |
| 2015 | 2.37% | -7.53% |
| 2014 | 30.29% | 4.13% |
| 2013 | 2.42% | 34.3% |
| 2012 | 17.67% | 17.92% |
| 2011 | 8.62% | -5.64% |
| 2010 | 28.44% | 24.29% |
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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VNQ | $10,000 | $29,506 | 11.05% |
| IWN | $10,000 | $28,189 | 10.96% |
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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.
VNQ’s CAGR is 0.09 percentage points higher than that of IWN and as a result, would have yielded $1,317 more on a $10,000 investment. Thus, VNQ outperformed IWN by 0.09% annually.
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