This comparative analysis is a detailed study of two successful ETFs, Vanguard’s VWCE and Blackrock’s IWDA. These are two funds that usually appear in many investment portfolios, and it’s essential to understand their differences to know what to expect from them.
To make our analysis as complete as possible, we will include not only a full explanation of each of the ETFs but also some of their key metrics, the historical performance of the product, the costs, and of course, the investment platforms where you will be able to purchase both products.
|Replicated index||FTSE All-World index||MSCI World index|
|AUM (in millions)||EUR +15,000 m||EUR +44,000 m|
|TER||0.22% p.a.||0.20% p.a.|
|3 yr Tracking Error||0.09||0.06|
VWCE Vs. IWDA at a glance
|Performance:||Regarding the performance of the two funds, during the same period (from July 2019 to the present), the most profitable was the IWDA.|
|Tracking error:||The ETF with the lowest tracking error, and therefore the most closely mirrored to the index, is the IWDA|
|TER:||IWDA has a lower TER ratio. That makes it the cheapest fund|
|Portfolio structure:||The style of the stocks is similar. However, the VWCE ETF has more presence in Asia, while the IWDA is more concentrated in the USA|
|Risk statistics:||For the 3-year risk/return analysis, the best ETF would be VWCE|
Comparison: VWCE vs. IWDA
We now move on to the comparative study between VWCE and IWDA, in which we will take into account different aspects, namely:
- Tracking Error
- Portfolio Structure
- Risk Statistics
IMPORTANT: before starting the comparison, note that we are discussing two ETFs whose benchmark differs. That is why we will not be able to point out a winner and a loser since it would be necessary for both funds to work on the same benchmark.
We will start with the comparative performance of the two ETFs. As the VWCE is younger than the IWDA, we will take the reference in the date of the former.
In the chart, we can see that the return of the IWDA (in green) is quite similar to that of the VWCE (in blue), although it is true that in the same period (from July 2019 to April 2023), the IWDA has a return of 37.41% while the VWCE remains at 32.43%.
Therefore, we could determine that performance is better in the case of IWDA than VWCE.
Tracking Error (TE)
The Tracking Error analyses the volatility of returns by measuring the consistency of a portfolio’s tracking difference (the difference between the performance of an ETF and its index) over time. A lower and zero-adjusted figure is much better in both cases.
The three-year TE of VWCE is 0.09, while the TE of IWDA is 0.06. That means that the replication work of the latter is more efficient than that of the former, although it is true that IWDA is using 100% of the assets of its benchmark index and VWCE only as a sample.
TER (Total Expense Ratio)
The TER is the indicator that refers to all the fees incurred by an ETF, so the lower rate is better.
The TER in the case of the IWDA is 0.20% p.a., while in the case of the VWCE, it is 0.22% p.a. In principle, we could consider that the IWDA would be better because it is cheaper, but here we must clarify that the nature of each ETF influences its cost.
Thus, the IWDA invests in securities of developed countries, where costs are efficient, and currency dispersion is little. On the other hand, the VWCE ETF invests in developed and developing countries, so the fees are necessarily higher as it does not have standardized rates and works with many more currencies.
Finally, we compare the portfolios to determine what to expect in each case. Here we can see how the comparison between some sectors and others, being how the distributions are similar in both cases:
The “Morningstar Style Box” shows us that the stocks are mostly of the Blend and large-cap type.
On the other hand, where we find a significant difference is in the geographic distribution, as the weight of VWCE in Asia is greater than in the case of IWDA and to the detriment of its presence in North America. This is the main explanation for the discrepancy in returns and expenses.
Finally, we will discuss the risk statistics compared between the two assets. The Sharpe ratio, which determines the return obtained per point of volatility, is 1.10 over three years in the case of VWCE, while for IWDA, it would be 1.04.
That explains why the three-year volatility of the VWCE is 13.80 compared to 16.11 for the IWDA. Therefore by the same risk, we can say that the VWCE is more efficient.
What is VWCE?
The VWCE ETF, whose full name is “Vanguard FTSE All-World UCITS ETF USD Accumulation,” is a Vanguard fund replicating the FTSE All-World index. This fund was launched in July 2019 and nowadays has assets equivalent to €15,144 million.
This ETF performs an optimized physical replication of the index, taking a significant sample of its entire composition. As of February 28, 2023, the VWCE portfolio has 3,732 stocks out of the 4,147 that compose the index.
Since its launch, the cumulative return until the close of April 6, 2023, has been +32.43%:
About the Index
The index benchmarked by the ETF is an index issued by FTSE, comprised of hundreds of large and mid-cap companies from both emerging and developed markets.
This index was launched in June 2000, although its portfolio dates back to December 1986 (backtest).
With the VWCE ETF, you can invest in companies such as Apple, NVIDIA, Tesla, Alphabet, Exxon, or United Health. The portfolio mainly weights the technology, financials, and consumer discretionary sectors:
In terms of geographic distribution, nearly 60% corresponds to the United States, while Japan is the second largest economy:
About the Investment Manager
The ETF is run by Vanguard Group. Founded in 1975, this company is a global leader in passive investment, given that it has been present in many innovations launched in the market year after year.
It now employs more than 20,000 employees worldwide and has total assets under management of over 7.6 trillion dollars. In the USA, it manages 204 different funds, while outside that country, the amount rises to 227.
What is IWDA?
The IWDA ETF, whose full name is “iShares Core MSCI World UCITS ETF USD (Acc),” is a Blackrock fund whose benchmark is the well-known MSCI World Index. This fund, launched in September 2009, is one of the largest in the market, with an AUM of 44.59 billion euros.
IWDA’s replication is physical, taking positions corresponding to the benchmark’s portfolio using actual securities.
The index started in September 2009, and at the close of April 6, 2023, it accumulated a return of +330.42%.
About the Index
The replicated index is the MSCI World Index, composed of large and mid-cap companies selected from 23 diverse countries. These countries will be part of the so-called Developed Markets group. In total, the index has 1,509 various stocks.
About the Investment Manager
The IWDA ETF is managed by BlackRock. Founded in 1999, it is the world’s largest asset manager (active and passive management combined) with $10 trillion in AUM. It employs a total of 18,400 people in 35 different countries.
The BlackRock division dedicated to passive management is named iShares, while the actively managed funds are under the brand BlackRock. In total, the company offers more than 1,000 different funds and ETFs available to investors.
Cheapest brokers to invest in VWCE and IWDA
One of the aspects of our analysis is about the platforms where it’s possible to find these ETFs. We selected some of the cheapest ETF brokers in the market to make investing easier.
|Brokers||ETF fees||Available ETFs||Minimum deposit||Other fees|
|Freedom24||From: €/$0.01 per ETF + €/$1.2 per order||+1.500||€0||Withdrawal via bank transfer, currency exchange fees, etc.|
|DEGIRO||€/£0 (in selected ETFs) or €/£2 (in the remaining); + €/£1 external cost||+200||€0.01||Currency exchange fees and spreads.|
|IBKR||0.05% of Trade Value||+13.000||€0||Spreads.|
To conclude our comparative analysis, we must say that these are excellent ETFs. It is not easy to choose a clear winner, but here’s our take on the performance of these ETFs:
If you want an investment focused on developed markets, IWDA will undoubtedly be an excellent option. It is an ETF with low tracking error and adjusted costs. It can provide us with a good index replica.
On the other hand, if you want a more global view, considering the weight of different emerging economies (mainly Asian), the VWCE will be our choice. It also has a low TE and reduced costs.