The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and VBR is a Vanguard Small Value fund. So, what’s the difference between VWO and VBR? And which fund is better?
The expense ratio of VWO is 0.03 percentage points higher than VBR’s (0.1% vs. 0.07%). VWO also has a lower exposure to the financial services sector and a lower standard deviation. Overall, VWO has provided lower returns than VBR over the past ten years.
In this article, we’ll compare VWO vs. VBR. We’ll look at holdings and industry exposure, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss VWO’s and VBR’s fund composition, performance, and annual returns and examine how these affect their overall returns.
Summary
| VWO | VBR | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Vanguard Small-Cap Value Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Small Value |
| Issuer | Vanguard | Vanguard |
| AUM | 117.28B | 48.08B |
| Avg. Return | 5.79% | 12.28% |
| Div. Yield | 1.98% | 1.6% |
| Expense Ratio | 0.1% | 0.07% |
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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
VWO’s dividend yield is 0.38% higher than that of VBR (1.98% vs. 1.6%). Also, VWO yielded on average 6.49% less per year over the past decade (5.79% vs. 12.28%). The expense ratio of VWO is 0.03 percentage points higher than VBR’s (0.1% vs. 0.07%).
Fund Composition
Industry Exposure
| VWO | VBR | |
| Technology | 17.06% | 8.39% |
| Industrials | 5.95% | 18.44% |
| Energy | 5.48% | 5.15% |
| Communication Services | 11.41% | 1.77% |
| Utilities | 2.55% | 3.65% |
| Healthcare | 5.33% | 7.16% |
| Consumer Defensive | 5.87% | 4.36% |
| Real Estate | 3.13% | 10.92% |
| Financial Services | 18.15% | 20.04% |
| Consumer Cyclical | 16.1% | 13.82% |
| Basic Materials | 8.98% | 6.31% |
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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.
VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.
VWO is 1.89% less exposed to the Financial Services sector than VBR (18.15% vs 20.04%). VWO’s exposure to Technology and Consumer Cyclical stocks is 8.67% higher and 2.28% higher respectively (17.06% vs. 8.39% and 16.1% vs. 13.82%). In total, Real Estate, Healthcare, and Energy also make up 9.29% less of the fund’s holdings compared to VBR (13.94% vs. 23.23%).
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%.
| VBR Holdings | Weight |
| Diamondback Energy Inc | 0.55% |
| VICI Properties Inc Ordinary Shares | 0.54% |
| IDEX Corp | 0.54% |
| Nuance Communications Inc | 0.5% |
| Molina Healthcare Inc | 0.48% |
| Signature Bank | 0.46% |
| Novavax Inc | 0.44% |
| Howmet Aerospace Inc | 0.44% |
| Apollo Global Management Inc Class A | 0.42% |
| Brown & Brown Inc | 0.41% |
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
Risk Analysis
| VWO | VBR | |
| Mean Return | 0.45 | 1.08 |
| R-squared | 81.69 | 82.2 |
| Std. Deviation | 17.64 | 18.37 |
| Alpha | -1.36 | -5.09 |
| Beta | 1.06 | 1.23 |
| Sharpe Ratio | 0.27 | 0.67 |
| Treynor Ratio | 3.14 | 9.15 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Treynor Ratio of 3.14 with a R-squared of 81.69 and a Standard Deviation of 17.64. Its Alpha is -1.36 while VWO’s Beta is 1.06. Furthermore, the fund has a Mean Return of 0.45 and a Sharpe Ratio of 0.27.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a R-squared of 82.2 with a Alpha of -5.09 and a Beta of 1.23. Its Standard Deviation is 18.37 while VBR’s Sharpe Ratio is 0.67. Furthermore, the fund has a Mean Return of 1.08 and a Treynor Ratio of 9.15.
VWO’s Mean Return is 0.63 points lower than that of VBR and its R-squared is 0.51 points lower. With a Standard Deviation of 17.64, VWO is slightly less volatile than VBR. The Alpha and Beta of VWO are 3.73 points higher and 0.17 points lower than VBR’s Alpha and Beta.
Performance
Annual Returns
| Year | VWO | VBR |
| 2020 | 15.32% | 5.82% |
| 2019 | 20.4% | 22.76% |
| 2018 | -14.57% | -12.22% |
| 2017 | 31.38% | 11.79% |
| 2016 | 11.75% | 24.8% |
| 2015 | -15.35% | -4.67% |
| 2014 | 0.6% | 10.55% |
| 2013 | -5.0% | 36.57% |
| 2012 | 18.84% | 18.78% |
| 2011 | -18.68% | -4.05% |
| 2010 | 18.99% | 24.97% |
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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| VBR | $10,000 | $32,611 | 12.28% |
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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
VWO’s CAGR is 6.49 percentage points lower than that of VBR and as a result, would have yielded $16,411 less on a $10,000 investment. Thus, VWO performed worse than VBR by 6.49% annually.
