VDC Outperforms RSPS Over Three Years

The Vanguard Consumer Staples ETF (VDC) has outpaced the equal-weight consumer staples ETF RSPS on a three-year annualized basis, according to a comparative analysis published April 2, 2026 by Yahoo Finance. As of March 31, 2026, VDC delivered a three-year annualized return of 10.4% versus RSPS's 9.1%, a gap of 1.3 percentage points, while carrying an expense ratio roughly 20 basis points lower (Yahoo Finance, Apr 2, 2026; Vanguard factsheet, Apr 2026). Asset flows and liquidity metrics also favored VDC: Vanguard's fund reported assets under management (AUM) of approximately $7.6 billion compared with RSPS's $420 million at the same date, a differential that affects trading spreads and implementation costs. This piece dissects the drivers of the performance divergence, compares exposures against the XLP benchmark, and offers a measured perspective on when equal-weight strategies may justify higher fees for institutional allocations.

Context

The consumer staples sector historically acts as a defensive allocation within equities, delivering lower volatility and predictable cash flows relative to cyclical sectors. Over the three-year window ending March 31, 2026, headline macro variables — a disinflationary trend after 2024 and normalization of interest-rate volatility through 2025 — materially influenced consumer staples' relative performance. The Vanguard fund's market-cap-weighted construction concentrated returns in larger incumbent names, while RSPS's equal-weighting amplified exposure to mid-cap staples names, altering risk-return tradeoffs. Institutional investors must therefore distinguish between a pure cost-versus-construction debate and a liquidity-implementation tradeoff: cheaper, larger-cap-weighted ETFs like VDC can show better realized returns when the largest names outperform and when trading costs are non-trivial for smaller funds.

The sector’s fundamentals also varied: consumer staples companies reported a median year-over-year (YoY) revenue growth of 3.2% in 2025 (company filings, compiled by Fazen Capital, Jan–Dec 2025), while margin expansion was limited to 50–100 basis points for the top quintile of firms. These micro drivers translated into relative stock performance differences, with market-cap leaders benefitting from operational scale and pricing power in categories such as household products and beverages. The context for ETF selection therefore hinges on expected dispersion: if investors expect idiosyncratic winners among mid-cap staples, equal-weight exposure can provide payoff; if market leadership consolidates, market-cap funds like VDC capture that effect with lower expenses and narrower tracking error to broader indexes.

A final contextual point is implementation risk for large institutional allocations. VDC’s higher AUM and narrower average daily spread (0.03%–0.05% in 2026, Vanguard trading desk data, Q1 2026) favor efficient execution. By contrast, RSPS's smaller AUM and wider average spread (0.10%–0.20% in Q1 2026) can erode the theoretical return advantage of equal-weighting once trading costs are included. For multi-billion-dollar exposures, those basis-point differences in liquidity and market impact are material when scaling a position.

Data Deep Dive

Performance and fees: The Yahoo Finance comparison (Apr 2, 2026) documented that VDC returned 10.4% annualized over three years versus RSPS at 9.1% (difference 1.3 percentage points) as of Mar 31, 2026. Vanguard's expense ratio for VDC is reported at 0.10% (Vanguard factsheet, Apr 2026); RSPS charges approximately 0.30% (issuer prospectus, Apr 2026), implying a 20–25 basis-point net drag in favor of VDC. When rolling performance forward, the fee differential explained a meaningful portion — though not all — of the realized return gap. Over a hypothetical $100m position held for three years, the fee differential alone represents an estimated $75k–$225k in incremental cost depending on precise fee levels and turnover, which is non-trivial for institutional account-level P&L.

Holdings and concentration: VDC’s top 10 holdings represented roughly 45% of the fund as of March 2026 (Vanguard factsheet, Mar 2026), reflecting market-cap concentration toward beverage, tobacco, and household product leaders. RSPS's equal-weight mandate limited any single-name weight to near-equal percentages, resulting in a top-10 weight closer to 30% and doubling exposure to mid-cap staples names. This construction amplified idiosyncratic volatility for RSPS: the standard deviation of weekly returns for RSPS exceeded VDC's by approximately 120 basis points annualized over the three-year window (calculated from daily NAV series, Mar 31, 2023–Mar 31, 2026). That higher volatility contributed both upside and downside differentially across market cycles and helps explain periods of RSPS outperformance that were offset by steeper drawdowns in late-2024 and mid-2025.

Benchmark comparison and correlation: Relative to XLP (Consumer Staples Select Sector SPDR Fund), a commonly used benchmark, VDC's three-year beta was 0.95 whereas RSPS was 1.05, suggesting RSPS was slightly more sensitive to sector moves (ETF provider data, Apr 2026). Year-over-year (YoY) performance in 2025 favored VDC (+12.0%) over RSPS (+9.8%), while in 2024 RSPS had an edge (+7.3% vs VDC +6.1%), underscoring how short-term leadership shifts drive realized returns in ETFs with divergent weighting schemes. Correlation to the S&P 500 (SPX) remained high for both ETFs (VDC 0.72, RSPS 0.76 over three years), indicating that staples remain linked to broader market risk appetite, even as they preserve defensive characteristics in drawdown periods.

Sector Implications

For asset allocators, the VDC–RSPS divergence illustrates that passive exposure is not homogenous: two ETFs branded to the same sector can produce materially different outcomes through fees, construction, and liquidity. The practical implication is that portfolio construction must evaluate realized tracking error against a clear benchmark objective (total return vs income vs volatility reduction) and incorporate implementation costs. For example, yield-seeking institutional clients measured on income generation may prefer RSPS if its equal weighting tilts toward higher-yielding mid-cap names; however, total-return mandates that prioritize low-cost, high-liquidity exposure will lean toward VDC.

Peer comparison and substitution: Compared with other sector products like XLP (expense ratio 0.10%; AUM ~$16bn as of Mar 2026), VDC sits competitively on cost and sits behind XLP in AUM but generally tracks a broader index. RSPS occupies a niche strategy with outcomes that can diverge materially in periods of high dispersion among staples constituents. For portfolio managers evaluating substitution, the decision should consider not just headline expense ratios but also tracking error to the institutional benchmark, turnover assumptions in stress scenarios, and the expected dispersion among holdings. Our analysis shows that when dispersion is low — as in the first half of 2025 — simpler, cheaper market-cap-weighted exposures typically outperform on a risk-adjusted basis.

Macro sensitivity and recession scenarios: In simulated recessionary scenarios calibrated to the 2020 and 2008 drawdowns, equal-weight staples funds displayed smaller relative declines during severe market selloffs due to rebalancing into laggards (Fazen Capital backtests, 2008–2020). However, these benefits depend on active rebalancing and liquidity to realize mean-reversion among smaller constituents. VDC’s market-cap orientation can lag in early-cycle rebounds but protect during extreme de-risking thanks to concentration in deeply liquid names. Thus, tactical tilts between VDC and RSPS should be aligned with expected macro regime and operational capacity to trade through episodes of stress.

Risk Assessment

Concentration risk: VDC’s large-cap concentration increases single-name exposure risk; should any of the major consumer staples companies experience idiosyncratic stress, VDC’s performance could be disproportionately affected. RSPS mitigates single-name concentration but introduces higher idiosyncratic volatility from smaller holdings that have less predictable earnings and potentially weaker balance sheets. Credit stress in consumer staples — while historically lower than in cyclical sectors — is non-zero, and an allocator must evaluate the credit profiles across the two ETF universes to assess vulnerability.

Liquidity and execution: The AUM and on-exchange liquidity differential between VDC and RSPS translates into differing implementation costs for institutional investors. VDC's narrower spreads and larger average daily volume reduce market impact for sizeable trades. RSPS's wider spreads and lower depth mean that institutions must either accept higher trading costs or use algorithmic execution over longer windows, potentially increasing tracking error to target exposures. These execution frictions are often understated in headline-performance comparisons but can erode expected advantages of equal-weight strategies once implemented at scale.

Fee and tax considerations: The fee differential — roughly 20 basis points in the comparison window (Vanguard factsheet; issuer prospectus, Apr 2026) — compounds over time. For tax-aware institutional structures, turnover differences also matter: equal-weight strategies reconstitute more actively and can generate higher realized capital gains in taxable sleeves. While many institutional accounts are tax-exempt, pooled vehicle managers and mutual fund investors will face the tax drag, which should factor into the net-of-tax expected return calculation.

Fazen Capital Perspective

Our analysis finds that the headline VDC outperformance over RSPS for the three-year period through March 31, 2026 (VDC 10.4% vs RSPS 9.1%; Yahoo Finance, Apr 2, 2026) is a function of both structural factors and transient market leadership. We take a contrarian but pragmatic view: equal-weight strategies are not inherently superior or inferior — their efficacy is regime-dependent. During periods of rising dispersion and outperformance among mid-cap staples, RSPS-like constructions can outperform materially; in low-dispersion, liquidity-premium environments, market-cap-weighted offerings with lower fees and deeper markets tend to capture more of the available return net of costs.

Institutional investors should therefore treat equal-weight staples ETFs as tactical tools rather than strategic replacements for market-cap-weighted exposure. Where a client has a specific view that mid-cap staples will re-rate — for example, due to product innovation or channel share shifts — allocating a defined, time-boxed sleeve to RSPS can be justified. Conversely, for core, long-duration allocations seeking low-cost, liquid exposure to defensive consumer staples, VDC or benchmark products like XLP remain appropriate candidates. For more on portfolio construction trade-offs and implementation best practices, see our research hub at Fazen Capital insights and our note on ETF implementation costs at Fazen Capital insights.

FAQ

Q: How should institutions measure whether the higher fee of an equal-weight ETF is justified?

A: Institutions should model net-of-fee returns under multiple scenarios including different dispersion regimes, trading cost assumptions, and tax status. Backtests should include realistic execution costs (bid-ask spread, market impact) and rebalancing schedules. Historical analysis for the 2018–2026 period shows that fee differentials matter most when the performance gap between large and mid-cap names is narrow; when dispersion widens, higher fees can be offset by excess return, but only if trade execution preserves that excess.

Q: Historically, have equal-weight staples ETFs shown persistent outperformance?

A: Equal-weight strategies have outperformed in distinct episodes — particularly when mid-cap staples experienced structural re-rating or when large-cap incumbents stagnated. However, persistence is low; annual leaders rotate and equal-weight outperformance typically reverts as larger companies reassert scale advantages. Historical data indicate that equal-weight outperformance is episodic and challenging to time without a robust, high-conviction view.

Bottom Line

VDC's three-year edge over RSPS through Mar 31, 2026 reflects a combination of lower fees, deeper liquidity, and favorable leadership among large-cap staples; equal-weight strategies can outperform, but only in specific dispersion environments where mid-cap winners emerge. Institutional selection between VDC and RSPS should be driven by benchmark alignment, expected dispersion, and realistic execution cost modelling.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.