VBK vs. SLYG: A Cost-Performance Showdown in Small-Cap Growth ETFs

Vanguard’s VBK and State Street’s SLYG represent two dominant players in the small-cap growth ETF segment, each targeting companies with market capitalizations typically under $2 billion. While both funds emphasize technology, consumer discretionary, and healthcare sectors, their structural differences are increasingly material for long-term investors. VBK maintains a lower expense ratio of 0.07%, compared to SLYG’s 0.15%, translating into meaningful cost savings over time—especially in volatile markets where fees erode returns. Despite the higher fee, SLYG has outperformed VBK on a three-year annualized basis by 1.8 percentage points, driven by a more aggressive tilt toward high-growth tech names and a broader sector weighting in consumer discretionary. In contrast, VBK's approach is slightly more balanced, with a stronger presence in healthcare and a more conservative allocation to momentum-driven stocks. The difference in tracking error reflects these strategic distinctions, with SLYG exhibiting greater volatility during market corrections. As of early 2026, VBK holds approximately 1,040 securities, while SLYG manages around 970, suggesting deeper diversification in VBK despite its smaller average weight per holding. Both funds have seen net inflows in Q4 2025, but VBK’s $2.3 billion in assets under management grew at a slower pace than SLYG’s $1.8 billion, likely due to investor preference for higher-return potential even at elevated costs. The divergence underscores a key investment decision: whether to prioritize low-cost, stable exposure (VBK) or seek enhanced returns through higher active risk (SLYG). For retirees and institutional investors focused on capital preservation, VBK may be preferable. Meanwhile, younger, growth-oriented portfolios might favor SLYG’s upside potential.