The iShares MSCI ACWI ETF (ACWI) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. ACWI is a iShares N/A fund and IEF is a iShares Long Government fund. So, what’s the difference between ACWI and IEF? And which fund is better?
The expense ratio of ACWI is 0.17 percentage points higher than IEF’s (0.32% vs. 0.15%). ACWI also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, ACWI has provided higher returns than IEF over the past 11 years.
In this article, we’ll compare ACWI vs. IEF. We’ll look at holdings and fund composition, as well as at their industry exposure and performance. Moreover, I’ll also discuss ACWI’s and IEF’s risk metrics, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI ACWI ETF||iShares 7-10 Year Treasury Bond ETF|
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
ACWI’s dividend yield is 0.55% higher than that of IEF (1.39% vs. 0.84%). Also, ACWI yielded on average 5.15% more per year over the past decade (10.21% vs. 5.06%). The expense ratio of ACWI is 0.17 percentage points higher than IEF’s (0.32% vs. 0.15%).
|Facebook Inc A||1.25%|
|Alphabet Inc Class C||1.12%|
|Alphabet Inc A||1.09%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.79%|
|JPMorgan Chase & Co||0.71%|
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The iShares MSCI ACWI ETF (ACWI) has a Standard Deviation of 14.05 with a Treynor Ratio of 9.45 and a Mean Return of 0.89. Its Alpha is 0.15 while ACWI’s Beta is 1. Furthermore, the fund has a Sharpe Ratio of 0.71 and a R-squared of 99.96.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a R-squared of 77.56 with a Alpha of -1.2 and a Mean Return of 0.32. Its Sharpe Ratio is 0.6 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Beta of 1.59 and a Treynor Ratio of 1.97.
ACWI’s Mean Return is 0.57 points higher than that of IEF and its R-squared is 22.40 points higher. With a Standard Deviation of 14.05, ACWI is slightly more volatile than IEF. The Alpha and Beta of ACWI are 1.35 points higher and 0.59 points lower than IEF’s Alpha and Beta.
ACWI had its best year in 2019 with an annual return of 26.7%. ACWI’s worst year over the past decade yielded -9.15% and occurred in 2018. In most years the iShares MSCI ACWI ETF provided moderate returns such as in 2016, 2010, and 2012 where annual returns amounted to 8.22%, 12.31%, and 15.99% respectively.
The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in ACWI would have resulted in a final balance of $27,241. This is a profit of $17,241 over 11 years and amounts to a compound annual growth rate (CAGR) of 10.21%.
With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
ACWI’s CAGR is 5.15 percentage points higher than that of IEF and as a result, would have yielded $10,305 more on a $10,000 investment. Thus, ACWI outperformed IEF by 5.15% annually.
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