The Vanguard Energy Index Fund ETF (VDE) and the Fidelity MSCI Energy Index ETF (FENY) are two of the largest energy sector ETFs and two of the most popular among individual investors. Many investors compare VDE vs FENY because they are so similar, although differences are difficult to find.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
VDE and FENY track the same index and there is no material difference between the funds. They are identical and interchangeable in my opinion.
The Longer Answer
Historical Performance: VDE vs FENY
VDE was launched back in 2004, while FENY was launched on October 21, 2013. Since then, the two funds have performed identically, with an annualized difference of only .16%! The cumulative performance differential over that timeframe has only been about 2% too! From a performance perspective, VDE and FENY are identical and interchangeable.
Portfolio Exposures: VDE vs FENY
Both VDE and FENY track the same index, the MSCI US Investable Market Energy 25/50 Index. Consequently, the two funds have identical geographic, market-cap, and industry exposures.
Geographic Exposure
Both VDE and FENY hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical geographic exposures.
Market Cap Exposure
As mentioned above, both funds track the same index and have materially identical market cap exposures.
Sector Exposure
VDE and FENY are energy ETFs and so their holdings are 100% energy stocks.
Practical Factors: VDE vs FENY
Transaction Costs
As ETFs, both FENY and VDE are free to trade on many platforms. Bid-ask spreads for both VDE and FENY are extremely low and volume is sufficient to prevent most individual investors from “moving the market.”
Expenses
FENY has a lower expense ratio at .08%, compared to VDE’s .10%. Although VDE is 25% more expensive, we’re talking about 2 basis points. At these low levels of expense ratios, the difference doesn’t matter.
Tax Efficiency & Capital Gain Distributions
Neither VDE nor FENY has ever made a capital gains distribution and I do not expect them to make any moving forward. In my opinion, these two funds are equally tax-efficient.
From a tax-loss harvesting perspective, investors may want to avoid using these two funds as substitutes for one another since they could be considered “substantially identical” (given that they track the same index and are identical in many ways).
Bottom Line: VDE vs FENY
VDE and FENY are identical in nearly every way. I would not spend any time comparing them or trying to decide which is better.
Investors considering other energy ETFs should read my post comparing VDE vs XLE (State Street’s energy ETF). Those looking for a mutual fund should read about VDE vs VENAX (VDE’s mutual fund share class).
