For investors seeking exposure to U.S. small-cap value equities, the Vanguard Small-Cap Value ETF (VBR) and the iShares Russell 2000 Value ETF (IWN) are two widely considered options, each adhering to a value-oriented investment strategy but with distinct characteristics. A thorough comparison of these funds reveals differences in expense structures, portfolio diversification, sector emphasis, and performance metrics, informing investor preferences depending on individual priorities such as cost sensitivity or diversification breadth.
Cost and Size Overview
| Metric | VBR | IWN |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense Ratio | 0.07% | 0.24% |
| 1-Year Return (as of Dec. 23, 2025) | 8.22% | 12.77% |
| Dividend Yield | 2.0% | 1.6% |
| Assets Under Management | $59.6 billion | $11.8 billion |
VBR is notably more cost-effective with an expense ratio of 0.07% annually, approximately one-third that charged by IWN at 0.24%. Furthermore, Vanguard’s offering has amassed substantially greater assets under management, nearing $60 billion, compared to IWN’s approximately $12 billion. Additionally, VBR currently delivers a slightly higher dividend yield of 2.0%, versus 1.6% from IWN, which may be an attractive feature for income-focused investors.
Performance and Volatility Considerations
| Metric | VBR | IWN |
|---|---|---|
| Maximum Drawdown (5-Year) | -24.19% | -26.71% |
| Growth of $1,000 Over 5 Years | $1,502 | $1,396 |
Examining recent risk and growth characteristics, both funds have experienced comparable drawdowns over the past five years, with IWN reaching a slightly deeper peak-to-trough decline of 26.71% in contrast to VBR’s 24.19%. When assessing growth of a hypothetical $1,000 investment over this period, VBR has delivered a higher appreciation to $1,502 compared to IWN’s $1,396, suggesting a modest performance advantage on this timeframe.
Portfolio Composition and Sector Exposure
IWN tracks the Russell 2000 Value Index and comprises approximately 1,423 holdings, providing broad exposure across various sectors and companies. Financial services dominate the portfolio at 26%, followed by industrials at 13%, and health care at 11%. Notably, the top three individual stock positions in IWN — Echostar Corp Class A (ticker SATS), Hecla Mining (HL), and UMB Financial (UMBF) — each account for less than 1.1% of the fund’s assets, indicating minimal concentration risk. The fund boasts a long history with over 25 years of existence.
In contrast, VBR tracks a different index focusing on small-cap value stocks but with a slightly narrower selection, holding 840 stocks. Its principal sectors include industrials at 22%, financial services at 20%, and consumer discretionary at 14%. Vanguard’s largest individual holdings, such as NRG Energy (NRG), Sandisk (SNDK), and Emcor (EME), each represent under 1% of the total assets, maintaining diversified exposure though across fewer companies than IWN. This difference in breadth means VBR is somewhat less diversified but still offers extensive risk dispersion across the small-cap value segment.
Investor Considerations
When selecting between these options, the lower cost and higher dividend yield offered by VBR present compelling advantages for long-term investors prioritizing expense efficiency and income generation. The substantial asset base backing VBR further signifies robust investor acceptance and liquidity.
On the other hand, IWN’s broader diversification, extensive holdings count, and targeting of the Russell 2000 Value Index may appeal to investors who prioritize comprehensive exposure to the small-cap value universe and trust in a widely recognized index methodology favored for its transparency.
Performance over the long term appears similar between these funds, with IWN demonstrating comparatively stronger returns within the most recent year. Therefore, investor preference between these ETFs may hinge on weighting of factors such as fees, portfolio diversification, and yield considerations.
Careful evaluation of these nuances can assist in aligning ETF selection with individual investment goals and risk tolerance within the U.S. small-cap value equity category.
Glossary
- Expense Ratio: The proportion of fund assets paid annually to cover operating expenses.
- Dividend Yield: The annual dividend distributions expressed as a percentage of the fund's price.
- Beta: A metric indicating the fund's relative volatility compared to a benchmark, commonly the S&P 500.
- Drawdown: The peak-to-trough decline percentage over a specific period.
- Assets Under Management (AUM): The total market value of assets managed by the fund.
- Small-Cap: Stocks of companies with market capitalizations typically between $300 million and $2 billion.
- Value Stocks: Stocks considered undervalued based on fundamental metrics like earnings or book value.
- Index: A benchmark tracking a collection of securities, used as a reference for fund performance.
- Holdings: The individual securities comprising a fund’s portfolio.
- Sector Tilt: An allocation bias towards certain industries relative to others within the portfolio.
- Total Return: Investment gains including price appreciation and reinvested dividends or distributions.
- Diversification: Investment spread across various assets to mitigate risk from any single security.