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VWO vs. EFV: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between VWO and EFV? And which fund is better?

The expense ratio of VWO is 0.29 percentage points lower than EFV’s (0.1% vs. 0.39%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided higher returns than EFV over the past ten years.

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

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Summary

VWOEFV
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares MSCI EAFE Value ETF
CategoryDiversified Emerging MktsForeign Large Value
IssuerVanguardiShares
AUM117.28B14.37B
Avg. Return5.79%3.99%
Div. Yield1.98%2.94%
Expense Ratio0.1%0.39%

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 EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.

VWO’s dividend yield is 0.96% lower than that of EFV (1.98% vs. 2.94%). Also, VWO yielded on average 1.80% more per year over the past decade (5.79% vs. 3.99%). The expense ratio of VWO is 0.29 percentage points lower than EFV’s (0.1% vs. 0.39%).

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Fund Composition

Industry Exposure

VWO vs. EFV - Industry Exposure

VWOEFV
Technology17.06%2.98%
Industrials5.95%11.6%
Energy5.48%6.6%
Communication Services11.41%6.46%
Utilities2.55%6.14%
Healthcare5.33%9.19%
Consumer Defensive5.87%6.82%
Real Estate3.13%5.06%
Financial Services18.15%26.55%
Consumer Cyclical16.1%9.0%
Basic Materials8.98%9.59%

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 EAFE Value ETF (EFV) has the most exposure to the Financial Services sector at 26.55%. This is followed by Industrials and Basic Materials at 11.6% and 9.59% respectively. Real Estate (5.06%), Utilities (6.14%), and Communication Services (6.46%) only make up 17.66% of the fund’s total assets.

EFV’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Consumer Cyclical, Healthcare, and Basic Materials stocks at 6.6%, 6.82%, 9.0%, 9.19%, and 9.59%.

VWO is 8.40% less exposed to the Financial Services sector than EFV (18.15% vs 26.55%). VWO’s exposure to Technology and Consumer Cyclical stocks is 14.08% higher and 7.10% higher respectively (17.06% vs. 2.98% and 16.1% vs. 9.0%). In total, Real Estate, Healthcare, and Energy also make up 6.91% less of the fund’s holdings compared to EFV (13.94% vs. 20.85%).

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%.

EFV - Holdings

EFV HoldingsWeight
Novartis AG2.41%
Toyota Motor Corp2.21%
Commonwealth Bank of Australia1.59%
Siemens AG1.45%
Sanofi SA1.42%
HSBC Holdings PLC1.4%
TotalEnergies SE1.35%
Allianz SE1.23%
GlaxoSmithKline PLC1.18%
Rio Tinto PLC1.1%

EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.

HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.

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Risk Analysis

VWOEFV
Mean Return0.450.42
R-squared81.6992.15
Std. Deviation17.6416.53
Alpha-1.36-1.77
Beta1.061.05
Sharpe Ratio0.270.26
Treynor Ratio3.142.92

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Treynor Ratio of 3.14 with a Mean Return of 0.45 and a Standard Deviation of 17.64. Its Alpha is -1.36 while VWO’s Beta is 1.06. Furthermore, the fund has a R-squared of 81.69 and a Sharpe Ratio of 0.27.

The iShares MSCI EAFE Value ETF (EFV) has a R-squared of 92.15 with a Treynor Ratio of 2.92 and a Alpha of -1.77. Its Standard Deviation is 16.53 while EFV’s Beta is 1.05. Furthermore, the fund has a Sharpe Ratio of 0.26 and a Mean Return of 0.42.

VWO’s Mean Return is 0.03 points higher than that of EFV and its R-squared is 10.46 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than EFV. The Alpha and Beta of VWO are 0.41 points higher and 0.01 points higher than EFV’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. EFV - Annual Returns

YearVWOEFV
202015.32%-2.78%
201920.4%15.97%
2018-14.57%-14.88%
201731.38%21.22%
201611.75%4.87%
2015-15.35%-5.89%
20140.6%-5.65%
2013-5.0%22.61%
201218.84%17.52%
2011-18.68%-12.24%
201018.99%3.18%

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 2013 was the strongest year for EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.

Portfolio Growth

VWO vs. EFV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$16,2005.79%
EFV$10,000$14,1343.99%

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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.

VWO’s CAGR is 1.80 percentage points higher than that of EFV and as a result, would have yielded $2,066 more on a $10,000 investment. Thus, VWO outperformed EFV by 1.80% annually.


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