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VNQ vs. IWS: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between VNQ and IWS? And which fund is better?

The expense ratio of VNQ is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than IWS over the past ten years.

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

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Summary

VNQIWS
NameVanguard Real Estate Index Fund ETF SharesiShares Russell Mid-Cap Value ETF
CategoryReal EstateMid-Cap Value
IssuerVanguardiShares
AUM77.34B14.24B
Avg. Return11.05%12.35%
Div. Yield2.34%1.34%
Expense Ratio0.12%0.23%

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 Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

VNQ’s dividend yield is 1.00% higher than that of IWS (2.34% vs. 1.34%). Also, VNQ yielded on average 1.30% less per year over the past decade (11.05% vs. 12.35%). The expense ratio of VNQ is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%).

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Fund Composition

Industry Exposure

VNQ vs. IWS - Industry Exposure

VNQIWS
Technology0.0%11.39%
Industrials0.0%14.6%
Energy0.0%4.71%
Communication Services0.0%4.08%
Utilities0.0%6.97%
Healthcare0.0%8.56%
Consumer Defensive0.0%4.76%
Real Estate100.0%11.71%
Financial Services0.0%15.75%
Consumer Cyclical0.0%12.07%
Basic Materials0.0%5.4%

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 Mid-Cap Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

VNQ is 88.29% more exposed to the Real Estate sector than IWS (100.0% vs 11.71%). VNQ’s exposure to Technology and Industrials stocks is 11.39% lower and 14.60% lower respectively (0.0% vs. 11.39% and 0.0% vs. 14.6%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 32.58% less of the fund’s holdings compared to IWS (0.00% vs. 32.58%).

Holdings

VNQ - Holdings

VNQ HoldingsWeight
Vanguard Real Estate II Index11.62%
American Tower Corp7.24%
Prologis Inc5.33%
Crown Castle International Corp5.01%
Equinix Inc4.3%
Public Storage2.85%
Simon Property Group Inc2.52%
Digital Realty Trust Inc2.49%
SBA Communications Corp2.1%
Welltower Inc2.09%

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%.

IWS - Holdings

IWS HoldingsWeight
Twitter Inc0.69%
Marvell Technology Inc0.69%
IHS Markit Ltd0.62%
Prudential Financial Inc0.56%
Otis Worldwide Corp Ordinary Shares0.54%
International Flavors & Fragrances Inc0.53%
Xcel Energy Inc0.52%
Motorola Solutions Inc0.52%
Aptiv PLC0.52%
Aflac Inc0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

VNQIWS
Mean Return0.891.06
R-squared44.487.04
Std. Deviation16.1316.03
Alpha2.47-4.11
Beta0.761.1
Sharpe Ratio0.620.75
Treynor Ratio11.910.3

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 Alpha of 2.47. Its Treynor Ratio is 11.9 while VNQ’s Mean Return is 0.89. Furthermore, the fund has a R-squared of 44.4 and a Beta of 0.76.

The iShares Russell Mid-Cap Value ETF (IWS) has a Standard Deviation of 16.03 with a Sharpe Ratio of 0.75 and a Mean Return of 1.06. Its R-squared is 87.04 while IWS’s Alpha is -4.11. Furthermore, the fund has a Treynor Ratio of 10.3 and a Beta of 1.1.

VNQ’s Mean Return is 0.17 points lower than that of IWS and its R-squared is 42.64 points lower. With a Standard Deviation of 16.13, VNQ is slightly more volatile than IWS. The Alpha and Beta of VNQ are 6.58 points higher and 0.34 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. IWS - Annual Returns

YearVNQIWS
2020-4.72%4.76%
201928.91%26.78%
2018-5.95%-12.36%
20174.95%13.1%
20168.53%19.69%
20152.37%-4.93%
201430.29%14.49%
20132.42%33.11%
201217.67%18.27%
20118.62%-1.55%
201028.44%24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

VNQ vs. IWS - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$29,50611.05%
IWS$10,000$33,08312.35%

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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

VNQ’s CAGR is 1.30 percentage points lower than that of IWS and as a result, would have yielded $3,577 less on a $10,000 investment. Thus, VNQ performed worse than IWS by 1.30% annually.


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