The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and ACWI is a iShares N/A fund. So, what’s the difference between VWO and ACWI? And which fund is better?
The expense ratio of VWO is 0.22 percentage points lower than ACWI’s (0.1% vs. 0.32%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than ACWI over the past ten years.
In this article, we’ll compare VWO vs. ACWI. We’ll look at annual returns and fund composition, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VWO’s and ACWI’s performance, portfolio growth, and holdings and examine how these affect their overall returns.
Summary
| VWO | ACWI | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | iShares MSCI ACWI ETF |
| Category | Diversified Emerging Mkts | N/A |
| Issuer | Vanguard | iShares |
| AUM | 117.28B | 16.85B |
| Avg. Return | 5.79% | 10.21% |
| Div. Yield | 1.98% | 1.39% |
| Expense Ratio | 0.1% | 0.32% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) is a Diversified Emerging Mkts fund that is issued by Vanguard. It currently has 117.28B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 1.98% with an expense ratio of 0.1%.
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%.
VWO’s dividend yield is 0.59% higher than that of ACWI (1.98% vs. 1.39%). Also, VWO yielded on average 4.43% less per year over the past decade (5.79% vs. 10.21%). The expense ratio of VWO is 0.22 percentage points lower than ACWI’s (0.1% vs. 0.32%).
Fund Composition
Industry Exposure
| VWO | ACWI | |
| Technology | 17.06% | 20.41% |
| Industrials | 5.95% | 9.65% |
| Energy | 5.48% | 3.48% |
| Communication Services | 11.41% | 9.87% |
| Utilities | 2.55% | 2.61% |
| Healthcare | 5.33% | 11.74% |
| Consumer Defensive | 5.87% | 7.15% |
| Real Estate | 3.13% | 2.75% |
| Financial Services | 18.15% | 15.58% |
| Consumer Cyclical | 16.1% | 12.01% |
| Basic Materials | 8.98% | 4.73% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has the most exposure to the Financial Services sector at 18.15%. This is followed by Technology and Consumer Cyclical at 17.06% and 16.1% respectively. Real Estate (3.13%), Healthcare (5.33%), and Energy (5.48%) only make up 13.94% of the fund’s total assets.
VWO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.87%, 5.95%, 8.98%, 11.41%, and 16.1%.
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%.
VWO is 2.57% more exposed to the Financial Services sector than ACWI (18.15% vs 15.58%). VWO’s exposure to Technology and Consumer Cyclical stocks is 3.35% lower and 4.09% higher respectively (17.06% vs. 20.41% and 16.1% vs. 12.01%). In total, Real Estate, Healthcare, and Energy also make up 4.03% less of the fund’s holdings compared to ACWI (13.94% vs. 17.97%).
Holdings
| VWO Holdings | Weight |
| Tencent Holdings Ltd | 5.29% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.73% |
| Taiwan Semiconductor Manufacturing Co Ltd | 4.58% |
| Meituan | 1.88% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 1.7% |
| Reliance Industries Ltd Shs Dematerialised | 1.06% |
| Naspers Ltd Class N | 1.01% |
| Vale SA | 0.92% |
| Infosys Ltd | 0.91% |
| China Construction Bank Corp Class H | 0.84% |
VWO’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Taiwan Semiconductor Manufacturing Co Ltd, Meituan, and Taiwan Semiconductor Manufacturing Co Ltd ADR at 5.29%, 4.73%, 4.58%, 1.88%, and 1.7%.
Reliance Industries Ltd Shs Dematerialised (1.06%), Naspers Ltd Class N (1.01%), and Vale SA (0.92%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the VWO’s holdings at 0.91% and 0.84%.
| 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
| VWO | ACWI | |
| Mean Return | 0.45 | 0.89 |
| R-squared | 81.69 | 99.96 |
| Std. Deviation | 17.64 | 14.05 |
| Alpha | -1.36 | 0.15 |
| Beta | 1.06 | 1 |
| Sharpe Ratio | 0.27 | 0.71 |
| Treynor Ratio | 3.14 | 9.45 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Mean Return of 0.45 with a Standard Deviation of 17.64 and a Alpha of -1.36. Its Treynor Ratio is 3.14 while VWO’s Sharpe Ratio is 0.27. Furthermore, the fund has a Beta of 1.06 and a R-squared of 81.69.
The iShares MSCI ACWI ETF (ACWI) has a Mean Return of 0.89 with a Standard Deviation of 14.05 and a Sharpe Ratio of 0.71. Its Alpha is 0.15 while ACWI’s Beta is 1. Furthermore, the fund has a R-squared of 99.96 and a Treynor Ratio of 9.45.
VWO’s Mean Return is 0.44 points lower than that of ACWI and its R-squared is 18.27 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than ACWI. The Alpha and Beta of VWO are 1.51 points lower and 0.06 points higher than ACWI’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | ACWI |
| 2020 | 15.32% | 16.38% |
| 2019 | 20.4% | 26.7% |
| 2018 | -14.57% | -9.15% |
| 2017 | 31.38% | 24.35% |
| 2016 | 11.75% | 8.22% |
| 2015 | -15.35% | -2.39% |
| 2014 | 0.6% | 4.64% |
| 2013 | -5.0% | 22.91% |
| 2012 | 18.84% | 15.99% |
| 2011 | -18.68% | -7.6% |
| 2010 | 18.99% | 12.31% |
VWO had its best year in 2017 with an annual return of 31.38%. VWO’s worst year over the past decade yielded -18.68% and occurred in 2011. In most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares provided moderate returns such as in 2014, 2016, and 2020 where annual returns amounted to 0.6%, 11.75%, and 15.32% 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 |
| VWO | $10,000 | $16,200 | 5.79% |
| ACWI | $10,000 | $27,241 | 10.21% |
A $10,000 investment in VWO would have resulted in a final balance of $16,200. This is a profit of $6,200 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
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%.
VWO’s CAGR is 4.43 percentage points lower than that of ACWI and as a result, would have yielded $11,041 less on a $10,000 investment. Thus, VWO performed worse than ACWI by 4.43% annually.
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