The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares S&P 500 Value ETF (IVE) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IVE is a iShares Large Value fund. So, what’s the difference between VWO and IVE? And which fund is better?
The expense ratio of VWO is 0.08 percentage points lower than IVE’s (0.1% vs. 0.18%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than IVE over the past ten years.
In this article, we’ll compare VWO vs. IVE. We’ll look at annual returns and risk metrics, as well as at their performance and fund composition. Moreover, I’ll also discuss VWO’s and IVE’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.
Summary
| VWO | IVE | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | iShares S&P 500 Value ETF |
| Category | Diversified Emerging Mkts | Large Value |
| Issuer | Vanguard | iShares |
| AUM | 117.28B | 22.4B |
| Avg. Return | 5.79% | 11.68% |
| Div. Yield | 1.98% | 1.88% |
| Expense Ratio | 0.1% | 0.18% |
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 S&P 500 Value ETF (IVE) is a Large Value fund that is issued by iShares. It currently has 22.4B total assets under management and has yielded an average annual return of 11.68% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.18%.
VWO’s dividend yield is 0.10% higher than that of IVE (1.98% vs. 1.88%). Also, VWO yielded on average 5.90% less per year over the past decade (5.79% vs. 11.68%). The expense ratio of VWO is 0.08 percentage points lower than IVE’s (0.1% vs. 0.18%).
Fund Composition
Industry Exposure
| VWO | IVE | |
| Technology | 17.06% | 9.41% |
| Industrials | 5.95% | 12.19% |
| Energy | 5.48% | 5.43% |
| Communication Services | 11.41% | 6.4% |
| Utilities | 2.55% | 4.82% |
| Healthcare | 5.33% | 15.4% |
| Consumer Defensive | 5.87% | 9.23% |
| Real Estate | 3.13% | 4.38% |
| Financial Services | 18.15% | 22.06% |
| Consumer Cyclical | 16.1% | 7.68% |
| Basic Materials | 8.98% | 2.99% |
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 S&P 500 Value ETF (IVE) has the most exposure to the Financial Services sector at 22.06%. This is followed by Healthcare and Industrials at 15.4% and 12.19% respectively. Real Estate (4.38%), Utilities (4.82%), and Energy (5.43%) only make up 14.63% of the fund’s total assets.
IVE’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Consumer Defensive, Technology, and Industrials stocks at 6.4%, 7.68%, 9.23%, 9.41%, and 12.19%.
VWO is 3.91% less exposed to the Financial Services sector than IVE (18.15% vs 22.06%). VWO’s exposure to Technology and Consumer Cyclical stocks is 7.65% higher and 8.42% higher respectively (17.06% vs. 9.41% and 16.1% vs. 7.68%). In total, Real Estate, Healthcare, and Energy also make up 11.27% less of the fund’s holdings compared to IVE (13.94% vs. 25.21%).
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%.
| IVE Holdings | Weight |
| Berkshire Hathaway Inc Class B | 3.05% |
| JPMorgan Chase & Co | 2.65% |
| The Walt Disney Co | 1.85% |
| Bank of America Corp | 1.67% |
| Johnson & Johnson | 1.57% |
| Exxon Mobil Corp | 1.41% |
| Pfizer Inc | 1.38% |
| Cisco Systems Inc | 1.35% |
| Verizon Communications Inc | 1.33% |
| Intel Corp | 1.25% |
IVE’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, The Walt Disney Co, Bank of America Corp, and Johnson & Johnson at 3.05%, 2.65%, 1.85%, 1.67%, and 1.57%.
Exxon Mobil Corp (1.41%), Pfizer Inc (1.38%), and Cisco Systems Inc (1.35%) have a slightly smaller but still significant weight. Verizon Communications Inc and Intel Corp are also represented in the IVE’s holdings at 1.33% and 1.25%.
Risk Analysis
| VWO | IVE | |
| Mean Return | 0.45 | 1.05 |
| R-squared | 81.69 | 92.08 |
| Std. Deviation | 17.64 | 14.3 |
| Alpha | -1.36 | -2.9 |
| Beta | 1.06 | 1.01 |
| Sharpe Ratio | 0.27 | 0.83 |
| Treynor Ratio | 3.14 | 11.41 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Beta of 1.06 with a Sharpe Ratio of 0.27 and a Alpha of -1.36. Its Mean Return is 0.45 while VWO’s R-squared is 81.69. Furthermore, the fund has a Standard Deviation of 17.64 and a Treynor Ratio of 3.14.
The iShares S&P 500 Value ETF (IVE) has a Treynor Ratio of 11.41 with a Beta of 1.01 and a Alpha of -2.9. Its R-squared is 92.08 while IVE’s Standard Deviation is 14.3. Furthermore, the fund has a Sharpe Ratio of 0.83 and a Mean Return of 1.05.
VWO’s Mean Return is 0.60 points lower than that of IVE and its R-squared is 10.39 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than IVE. The Alpha and Beta of VWO are 1.54 points higher and 0.05 points higher than IVE’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | IVE |
| 2020 | 15.32% | 1.24% |
| 2019 | 20.4% | 31.71% |
| 2018 | -14.57% | -9.09% |
| 2017 | 31.38% | 15.19% |
| 2016 | 11.75% | 17.17% |
| 2015 | -15.35% | -3.24% |
| 2014 | 0.6% | 12.14% |
| 2013 | -5.0% | 31.69% |
| 2012 | 18.84% | 17.45% |
| 2011 | -18.68% | -0.63% |
| 2010 | 18.99% | 14.9% |
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 IVE, returning 31.71% on an annual basis. The poorest year for IVE in the last ten years was 2018, with a yield of -9.09%. Most years the iShares S&P 500 Value ETF has given investors modest returns, such as in 2014, 2010, and 2017, when gains were 12.14%, 14.9%, and 15.19% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| IVE | $10,000 | $31,350 | 11.68% |
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 IVE, the end total would have been $31,350. This equates to a $21,350 profit over 11 years and a compound annual growth rate (CAGR) of 11.68%.
VWO’s CAGR is 5.90 percentage points lower than that of IVE and as a result, would have yielded $15,150 less on a $10,000 investment. Thus, VWO performed worse than IVE by 5.90% annually.
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