The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and MTUM is a iShares Large Growth fund. So, what’s the difference between VWO and MTUM? And which fund is better?
The expense ratio of VWO is 0.05 percentage points lower than MTUM’s (0.1% vs. 0.15%). VWO also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than MTUM over the past ten years.
In this article, we’ll compare VWO vs. MTUM. We’ll look at annual returns and fund composition, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss VWO’s and MTUM’s industry exposure, performance, and holdings and examine how these affect their overall returns.
Summary
| VWO | MTUM | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | iShares MSCI USA Momentum Factor ETF |
| Category | Diversified Emerging Mkts | Large Growth |
| Issuer | Vanguard | iShares |
| AUM | 117.28B | 14.53B |
| Avg. Return | 5.79% | 17.37% |
| Div. Yield | 1.98% | 0.44% |
| Expense Ratio | 0.1% | 0.15% |
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 USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.
VWO’s dividend yield is 1.54% higher than that of MTUM (1.98% vs. 0.44%). Also, VWO yielded on average 11.58% less per year over the past decade (5.79% vs. 17.37%). The expense ratio of VWO is 0.05 percentage points lower than MTUM’s (0.1% vs. 0.15%).
Fund Composition
Industry Exposure
| VWO | MTUM | |
| Technology | 17.06% | 15.24% |
| Industrials | 5.95% | 12.47% |
| Energy | 5.48% | 1.77% |
| Communication Services | 11.41% | 13.18% |
| Utilities | 2.55% | 0.19% |
| Healthcare | 5.33% | 6.41% |
| Consumer Defensive | 5.87% | 2.88% |
| Real Estate | 3.13% | 0.43% |
| Financial Services | 18.15% | 34.32% |
| Consumer Cyclical | 16.1% | 9.96% |
| Basic Materials | 8.98% | 3.15% |
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 USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.
MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.
VWO is 16.17% less exposed to the Financial Services sector than MTUM (18.15% vs 34.32%). VWO’s exposure to Technology and Consumer Cyclical stocks is 1.82% higher and 6.14% higher respectively (17.06% vs. 15.24% and 16.1% vs. 9.96%). In total, Real Estate, Healthcare, and Energy also make up 5.33% more of the fund’s holdings compared to MTUM (13.94% vs. 8.61%).
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%.
| MTUM Holdings | Weight |
| Tesla Inc | 5.63% |
| The Walt Disney Co | 4.39% |
| JPMorgan Chase & Co | 4.35% |
| Berkshire Hathaway Inc Class B | 4.34% |
| Bank of America Corp | 3.81% |
| PayPal Holdings Inc | 3.76% |
| Wells Fargo & Co | 3.05% |
| Applied Materials Inc | 3.05% |
| Moderna Inc | 2.89% |
| Alphabet Inc Class C | 2.84% |
MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.
PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.
Risk Analysis
| VWO | MTUM | |
| Mean Return | 0.45 | 0 |
| R-squared | 81.69 | 0 |
| Std. Deviation | 17.64 | 0 |
| Alpha | -1.36 | 0 |
| Beta | 1.06 | 0 |
| Sharpe Ratio | 0.27 | 0 |
| Treynor Ratio | 3.14 | 0 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Standard Deviation of 17.64 with a Sharpe Ratio of 0.27 and a Mean Return of 0.45. Its Treynor Ratio is 3.14 while VWO’s Alpha is -1.36. Furthermore, the fund has a R-squared of 81.69 and a Beta of 1.06.
The iShares MSCI USA Momentum Factor ETF (MTUM) has a Sharpe Ratio of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Beta is 0 while MTUM’s R-squared is 0. Furthermore, the fund has a Mean Return of 0 and a Standard Deviation of 0.
VWO’s Mean Return is 0.45 points higher than that of MTUM and its R-squared is 81.69 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than MTUM. The Alpha and Beta of VWO are 1.36 points lower and 1.06 points higher than MTUM’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | MTUM |
| 2020 | 15.32% | 29.69% |
| 2019 | 20.4% | 27.57% |
| 2018 | -14.57% | -1.77% |
| 2017 | 31.38% | 37.6% |
| 2016 | 11.75% | 4.89% |
| 2015 | -15.35% | 9.12% |
| 2014 | 0.6% | 14.48% |
| 2013 | -5.0% | 0.0% |
| 2012 | 18.84% | 0.0% |
| 2011 | -18.68% | 0.0% |
| 2010 | 18.99% | 0.0% |
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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $14,830 | 5.79% |
| MTUM | $10,000 | $29,301 | 17.37% |
A $10,000 investment in VWO would have resulted in a final balance of $14,830. This is a profit of $4,830 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.
VWO’s CAGR is 11.58 percentage points lower than that of MTUM and as a result, would have yielded $14,471 less on a $10,000 investment. Thus, VWO performed worse than MTUM by 11.58% annually.
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