VWO vs. IWS: What’s The Difference?

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

The expense ratio of VWO is 0.13 percentage points lower than IWS’s (0.1% vs. 0.23%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than IWS over the past ten years.

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

Summary

VWO IWS
Name Vanguard FTSE Emerging Markets Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Diversified Emerging Mkts Mid-Cap Value
Issuer Vanguard iShares
AUM 117.28B 14.24B
Avg. Return 5.79% 12.35%
Div. Yield 1.98% 1.34%
Expense Ratio 0.1% 0.23%

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 Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

VWO’s dividend yield is 0.64% higher than that of IWS (1.98% vs. 1.34%). Also, VWO yielded on average 6.56% less per year over the past decade (5.79% vs. 12.35%). The expense ratio of VWO is 0.13 percentage points lower than IWS’s (0.1% vs. 0.23%).

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Fund Composition

Industry Exposure

VWO vs. IWS - Industry Exposure

VWO IWS
Technology 17.06% 11.39%
Industrials 5.95% 14.6%
Energy 5.48% 4.71%
Communication Services 11.41% 4.08%
Utilities 2.55% 6.97%
Healthcare 5.33% 8.56%
Consumer Defensive 5.87% 4.76%
Real Estate 3.13% 11.71%
Financial Services 18.15% 15.75%
Consumer Cyclical 16.1% 12.07%
Basic Materials 8.98% 5.4%

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 Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

VWO is 2.40% more exposed to the Financial Services sector than IWS (18.15% vs 15.75%). VWO’s exposure to Technology and Consumer Cyclical stocks is 5.67% higher and 4.03% higher respectively (17.06% vs. 11.39% and 16.1% vs. 12.07%). In total, Real Estate, Healthcare, and Energy also make up 11.04% less of the fund’s holdings compared to IWS (13.94% vs. 24.98%).

Holdings

VWO - 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%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

VWO IWS
Mean Return 0.45 1.06
R-squared 81.69 87.04
Std. Deviation 17.64 16.03
Alpha -1.36 -4.11
Beta 1.06 1.1
Sharpe Ratio 0.27 0.75
Treynor Ratio 3.14 10.3

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

The iShares Russell Mid-Cap Value ETF (IWS) has a Sharpe Ratio of 0.75 with a R-squared of 87.04 and a Mean Return of 1.06. Its Alpha is -4.11 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a Beta of 1.1 and a Treynor Ratio of 10.3.

VWO’s Mean Return is 0.61 points lower than that of IWS and its R-squared is 5.35 points lower. With a Standard Deviation of 17.64, VWO is slightly more volatile than IWS. The Alpha and Beta of VWO are 2.75 points higher and 0.04 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

VWO vs. IWS - Annual Returns

Year VWO IWS
2020 15.32% 4.76%
2019 20.4% 26.78%
2018 -14.57% -12.36%
2017 31.38% 13.1%
2016 11.75% 19.69%
2015 -15.35% -4.93%
2014 0.6% 14.49%
2013 -5.0% 33.11%
2012 18.84% 18.27%
2011 -18.68% -1.55%
2010 18.99% 24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

VWO vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VWO $10,000 $16,200 5.79%
IWS $10,000 $33,083 12.35%

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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

VWO’s CAGR is 6.56 percentage points lower than that of IWS and as a result, would have yielded $16,883 less on a $10,000 investment. Thus, VWO performed worse than IWS by 6.56% annually.


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