NEW YORK, July 12, 2026, 11:14 (EDT)
The Vanguard Russell 2000 ETF (NASDAQ:VTWO) is up 20.74% on a net asset value basis in 2026 through Friday, outpacing the Vanguard S&P 500 ETF (NYSEARCA:VOO) by 9.40 percentage points. But six of VTWO’s ten largest positions at the end of May left its benchmark in the June index reshuffle.
The shift is key because the fund is now following a different group than it did when it led in the first half. Since U.S. markets were shut Sunday, Friday offers the most recent data. The Russell reconstitution, which resets who’s in the index, hit after the close on June 26.
The six stocks leaving VTWO accounted for 5.28% of the fund as of May 31 and about 70% of the 7.6% that its top 10 held at that time, using published rounded weights. So the main return figure now refers to a mix that’s not the same anymore.
| May 31 top-10 holding | VTWO weight | June 26 index move |
|---|---|---|
| Bloom Energy NYSE:BE | 1.79% | Shifted to Russell 1000 |
| Credo Technology Group NASDAQ:CRDO | 1.09% | Moved to Russell 1000 |
| Fabrinet NYSE:FN | 0.68% | Goes to Russell 1000 |
| Nextpower NASDAQ:NXT | 0.65% | Added to Russell 1000 |
| Coeur Mining NYSE:CDE | 0.57% | Goes to Russell 1000 |
| EchoStar NASDAQ:ECHO | 0.50% | Now in Russell 1000 |
| Total | 5.28% | This group makes up 69.5% of the previous top-10 weight |
Weights use the May 31 published numbers and might not add up exactly due to rounding.
The turnover slashed the benchmark’s stake in the group that drove much of the performance. Goldman Sachs NYSE:GS said stocks linked to AI infrastructure—power, hardware, and networking—accounted for about 40% of the Russell 2000’s 2026 gain, but their index share dropped to 7% from 15% after the shake-up.
The returns on Vanguard’s other small-cap funds point to the impact of index construction. Vanguard Small-Cap ETF (NYSEARCA:VB) is up 16.36% so far this year, while Vanguard Small-Cap Value ETF (NYSEARCA:VBR) has gained 15.40% through Friday. That puts VTWO up by 4.38 and 5.34 percentage points compared to those two funds.
| Fund | Benchmark or style | 2026 NAV return | Annual fee | Lead over VOO |
|---|---|---|---|---|
| VTWO | Russell 2000 blend | 20.74% | 0.06% | up 9.40 points |
| VB | CRSP U.S. Small Cap | 16.36% | 0.03% | ahead by 5.02 points |
| VBR | CRSP U.S. Small Cap Value | 15.40% | 0.05% | leads by 4.06 points |
| VOO | S&P 500 | 11.34% | 0.03% | — |
Net asset value returns through July 10. Annual expense ratios are the fees.
VBR traded at 17.8 times portfolio earnings, while the S&P 500 was at 28.1 times. So investors paid $17.80 for a dollar of annual profit in VBR. That discount didn’t outdo VTWO. This year, being in some fast-moving stocks counted more than shifting to cheaper names.
VB holds over 1,300 stocks, with the biggest sector allocations in industrials, tech, and financials. The ETF’s wide basket eases dependence on just a few firms, though it also lessened gains from AI stocks before the Russell reshuffle.
Small caps slipped last week, with the Russell 2000 down 0.61% for its first two-week losing streak in four months. The S&P 500 put on 1.23%. Nasdaq climbed 1.74%. The 10-year Treasury yield moved up to around 4.56% from 4.49%, hitting cash-dependent companies.
Inflation data and big bank earnings take focus next week. June CPI is out Tuesday, with PPI set for Wednesday and retail sales on Thursday. JPMorgan Chase NYSE:JPM and Goldman will post results Tuesday too. “A lot of factors coming to a head all at once,” said Michael Reynolds, VP of investment strategy at Glenmede. Reuters
If inflation runs hotter, bond yields could climb and hit small caps with their bigger debt loads. Goldman’s Ben Snider said about 30% of Russell 2000 debt has floating rates, compared to 7% for the S&P 500, and 29% of the index isn’t profitable. “The combination of elevated valuations and near-trend US economic growth points to low single-digit Russell 2000 returns in the next 12 months,” he wrote. Weaker inflation and steady lending might keep the small-cap rotation going, but VTWO’s 20.74% gain for the year doesn’t reflect what holders now own. businessinsider.com
