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VWO vs. IWR: What’s The Difference?

The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares Russell Mid-Cap ETF (IWR) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and IWR is a iShares Mid-Cap Blend fund. So, what’s the difference between VWO and IWR? And which fund is better?

The expense ratio of VWO is 0.09 percentage points lower than IWR’s (0.1% vs. 0.19%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than IWR over the past ten years.

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

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Summary

VWOIWR
NameVanguard FTSE Emerging Markets Index Fund ETF SharesiShares Russell Mid-Cap ETF
CategoryDiversified Emerging MktsMid-Cap Blend
IssuerVanguardiShares
AUM117.28B29.84B
Avg. Return5.79%14.15%
Div. Yield1.98%0.99%
Expense Ratio0.1%0.19%

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 Russell Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

VWO’s dividend yield is 0.99% higher than that of IWR (1.98% vs. 0.99%). Also, VWO yielded on average 8.36% less per year over the past decade (5.79% vs. 14.15%). The expense ratio of VWO is 0.09 percentage points lower than IWR’s (0.1% vs. 0.19%).

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Fund Composition

Industry Exposure

VWO vs. IWR - Industry Exposure

VWOIWR
Technology17.06%19.67%
Industrials5.95%14.54%
Energy5.48%3.48%
Communication Services11.41%4.64%
Utilities2.55%4.46%
Healthcare5.33%11.76%
Consumer Defensive5.87%3.82%
Real Estate3.13%8.31%
Financial Services18.15%11.64%
Consumer Cyclical16.1%13.59%
Basic Materials8.98%4.1%

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 Russell Mid-Cap ETF (IWR) has the most exposure to the Technology sector at 19.67%. This is followed by Industrials and Consumer Cyclical at 14.54% and 13.59% respectively. Consumer Defensive (3.82%), Basic Materials (4.1%), and Utilities (4.46%) only make up 12.38% of the fund’s total assets.

IWR’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Healthcare, and Consumer Cyclical stocks at 4.64%, 8.31%, 11.64%, 11.76%, and 13.59%.

VWO is 6.51% more exposed to the Financial Services sector than IWR (18.15% vs 11.64%). VWO’s exposure to Technology and Consumer Cyclical stocks is 2.61% lower and 2.51% higher respectively (17.06% vs. 19.67% and 16.1% vs. 13.59%). In total, Real Estate, Healthcare, and Energy also make up 9.61% less of the fund’s holdings compared to IWR (13.94% vs. 23.55%).

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%.

IWR - Holdings

IWR HoldingsWeight
IDEXX Laboratories Inc0.51%
DocuSign Inc0.51%
Twitter Inc0.48%
Chipotle Mexican Grill Inc0.47%
Roku Inc Class A0.44%
Marvell Technology Inc0.44%
DexCom Inc0.44%
Trane Technologies PLC0.43%
MSCI Inc0.43%
Carrier Global Corp Ordinary Shares0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

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Risk Analysis

VWOIWR
Mean Return0.451.17
R-squared81.6991.52
Std. Deviation17.6415.66
Alpha-1.36-2.8
Beta1.061.11
Sharpe Ratio0.270.86
Treynor Ratio3.1411.72

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

The iShares Russell Mid-Cap ETF (IWR) has a R-squared of 91.52 with a Treynor Ratio of 11.72 and a Alpha of -2.8. Its Mean Return is 1.17 while IWR’s Beta is 1.11. Furthermore, the fund has a Sharpe Ratio of 0.86 and a Standard Deviation of 15.66.

VWO’s Mean Return is 0.72 points lower than that of IWR and its R-squared is 9.83 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than IWR. The Alpha and Beta of VWO are 1.44 points higher and 0.05 points lower than IWR’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. IWR - Annual Returns

YearVWOIWR
202015.32%16.91%
201920.4%30.31%
2018-14.57%-9.13%
201731.38%18.32%
201611.75%13.58%
2015-15.35%-2.57%
20140.6%13.03%
2013-5.0%34.5%
201218.84%17.13%
2011-18.68%-1.67%
201018.99%25.25%

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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

VWO vs. IWR - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VWO$10,000$16,2005.79%
IWR$10,000$39,75114.15%

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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.

VWO’s CAGR is 8.36 percentage points lower than that of IWR and as a result, would have yielded $23,551 less on a $10,000 investment. Thus, VWO performed worse than IWR by 8.36% annually.


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