The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and VLUE is a iShares Large Value fund. So, what’s the difference between VNQ and VLUE? And which fund is better?
The expense ratio of VNQ is 0.03 percentage points lower than VLUE’s (0.12% vs. 0.15%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided higher returns than VLUE over the past ten years.
In this article, we’ll compare VNQ vs. VLUE. We’ll look at annual returns and fund composition, as well as at their portfolio growth and performance. Moreover, I’ll also discuss VNQ’s and VLUE’s holdings, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Real Estate Index Fund ETF Shares||iShares MSCI USA Value Factor ETF|
|Category||Real Estate||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 USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.
VNQ’s dividend yield is 0.45% higher than that of VLUE (2.34% vs. 1.89%). Also, VNQ yielded on average 2.14% more per year over the past decade (11.05% vs. 8.91%). The expense ratio of VNQ is 0.03 percentage points lower than VLUE’s (0.12% vs. 0.15%).
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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 USA Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.
VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.
VNQ is 96.81% more exposed to the Real Estate sector than VLUE (100.0% vs 3.19%). VNQ’s exposure to Technology and Industrials stocks is 26.89% lower and 9.14% lower respectively (0.0% vs. 26.89% and 0.0% vs. 9.14%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 28.84% less of the fund’s holdings compared to VLUE (0.00% vs. 28.84%).
|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%.
|General Motors Co||3.19%|
|Micron Technology Inc||3.14%|
|Cisco Systems Inc||3.05%|
|International Business Machines Corp||2.76%|
|Ford Motor Co||2.23%|
VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.
International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.
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The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a Standard Deviation of 16.13 and a R-squared of 44.4. Its Treynor Ratio is 11.9 while VNQ’s Mean Return is 0.89. Furthermore, the fund has a Sharpe Ratio of 0.62 and a Beta of 0.76.
The iShares MSCI USA Value Factor ETF (VLUE) has a Sharpe Ratio of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while VLUE’s Alpha is 0. Furthermore, the fund has a Beta of 0 and a Standard Deviation of 0.
VNQ’s Mean Return is 0.89 points higher than that of VLUE and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than VLUE. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than VLUE’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 2019 was the strongest year for VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VNQ would have resulted in a final balance of $17,549. This is a profit of $7,549 over 7 years and amounts to a compound annual growth rate (CAGR) of 11.05%.
With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.
VNQ’s CAGR is 2.14 percentage points higher than that of VLUE and as a result, would have yielded $302 more on a $10,000 investment. Thus, VNQ outperformed VLUE by 2.14% annually.
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