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VWO vs. ACWI: What’s The Difference?

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.

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Summary

VWOACWI
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares MSCI ACWI ETF
CategoryDiversified Emerging MktsN/A
IssuerVanguardiShares
AUM117.28B16.85B
Avg. Return5.79%10.21%
Div. Yield1.98%1.39%
Expense Ratio0.1%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%).

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Fund Composition

Industry Exposure

VWO vs. ACWI - Industry Exposure

VWOACWI
Technology17.06%20.41%
Industrials5.95%9.65%
Energy5.48%3.48%
Communication Services11.41%9.87%
Utilities2.55%2.61%
Healthcare5.33%11.74%
Consumer Defensive5.87%7.15%
Real Estate3.13%2.75%
Financial Services18.15%15.58%
Consumer Cyclical16.1%12.01%
Basic Materials8.98%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

VWO HoldingsWeight
Tencent Holdings Ltd5.29%
Alibaba Group Holding Ltd Ordinary Shares4.73%
Taiwan Semiconductor Manufacturing Co Ltd4.58%
Meituan1.88%
Taiwan Semiconductor Manufacturing Co Ltd ADR1.7%
Reliance Industries Ltd Shs Dematerialised1.06%
Naspers Ltd Class N1.01%
Vale SA0.92%
Infosys Ltd0.91%
China Construction Bank Corp Class H0.84%

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

ACWI HoldingsWeight
Apple Inc3.44%
Microsoft Corp2.91%
Amazon.com Inc2.21%
Facebook Inc A1.25%
Alphabet Inc Class C1.12%
Alphabet Inc A1.09%
Taiwan Semiconductor Manufacturing Co Ltd0.79%
Tesla Inc0.78%
NVIDIA Corp0.74%
JPMorgan Chase & Co0.71%

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%.

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Risk Analysis

VWOACWI
Mean Return0.450.89
R-squared81.6999.96
Std. Deviation17.6414.05
Alpha-1.360.15
Beta1.061
Sharpe Ratio0.270.71
Treynor Ratio3.149.45

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.

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Performance

Annual Returns

VWO vs. ACWI - Annual Returns

YearVWOACWI
202015.32%16.38%
201920.4%26.7%
2018-14.57%-9.15%
201731.38%24.35%
201611.75%8.22%
2015-15.35%-2.39%
20140.6%4.64%
2013-5.0%22.91%
201218.84%15.99%
2011-18.68%-7.6%
201018.99%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

VWO vs. ACWI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$16,2005.79%
ACWI$10,000$27,24110.21%

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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