AGG vs. IEMG: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares Core MSCI Emerging Markets ETF (IEMG) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and IEMG is a iShares Diversified Emerging Mkts fund. So, what’s the difference between AGG and IEMG? And which fund is better?

The expense ratio of AGG is 0.07 percentage points lower than IEMG’s (0.04% vs. 0.11%). AGG is mostly comprised of AAA bonds while IEMG has a high exposure to the technology sector. Overall, AGG has provided lower returns than IEMG over the past ten years.

In this article, we’ll compare AGG vs. IEMG. We’ll look at performance and holdings, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss AGG’s and IEMG’s fund composition, risk metrics, and annual returns and examine how these affect their overall returns.

Summary

AGG IEMG
Name iShares Core U.S. Aggregate Bond ETF iShares Core MSCI Emerging Markets ETF
Category Intermediate-Term Bond Diversified Emerging Mkts
Issuer iShares iShares
AUM 88.8B 83.68B
Avg. Return 4.04% 7.41%
Div. Yield 1.95% 1.78%
Expense Ratio 0.04% 0.11%

The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.

The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.

AGG’s dividend yield is 0.17% higher than that of IEMG (1.95% vs. 1.78%). Also, AGG yielded on average 3.37% less per year over the past decade (4.04% vs. 7.41%). The expense ratio of AGG is 0.07 percentage points lower than IEMG’s (0.04% vs. 0.11%).

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Fund Composition

Holdings

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.

IEMG - Holdings

IEMG Holdings Weight
Taiwan Semiconductor Manufacturing Co Ltd 5.37%
Tencent Holdings Ltd 4.42%
Alibaba Group Holding Ltd Ordinary Shares 4.38%
Samsung Electronics Co Ltd 3.49%
Meituan 1.52%
Naspers Ltd Class N 0.93%
Vale SA 0.91%
Reliance Industries Ltd Shs Dematerialised 0.83%
China Construction Bank Corp Class H 0.77%
Infosys Ltd 0.74%

IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.

Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.

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Risk Analysis

AGG IEMG
Mean Return 0.28 0
R-squared 99.96 0
Std. Deviation 3.03 0
Alpha -0.08 0
Beta 1.01 0
Sharpe Ratio 0.9 0
Treynor Ratio 2.7 0

The iShares Core U.S. Aggregate Bond ETF (AGG) has a R-squared of 99.96 with a Beta of 1.01 and a Alpha of -0.08. Its Mean Return is 0.28 while AGG’s Treynor Ratio is 2.7. Furthermore, the fund has a Standard Deviation of 3.03 and a Sharpe Ratio of 0.9.

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Mean Return of 0 with a Beta of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while IEMG’s Sharpe Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Alpha of 0.

AGG’s Mean Return is 0.28 points higher than that of IEMG and its R-squared is 99.96 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than IEMG. The Alpha and Beta of AGG are 0.08 points lower and 1.01 points higher than IEMG’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. IEMG - Annual Returns

Year AGG IEMG
2020 7.42% 18.18%
2019 8.68% 17.5%
2018 -0.05% -14.69%
2017 3.53% 36.78%
2016 2.56% 9.98%
2015 0.48% -13.86%
2014 6.04% -2.04%
2013 -2.15% -2.16%
2012 4.04% 0.0%
2011 7.58% 0.0%
2010 6.3% 0.0%

AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.

The year 2017 was the strongest year for IEMG, returning 36.78% on an annual basis. The poorest year for IEMG in the last ten years was 2018, with a yield of -14.69%. Most years the iShares Core MSCI Emerging Markets ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

AGG vs. IEMG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $13,201 4.04%
IEMG $10,000 $15,037 7.41%

A $10,000 investment in AGG would have resulted in a final balance of $13,201. This is a profit of $3,201 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in IEMG, the end total would have been $15,037. This equates to a $5,037 profit over 7 years and a compound annual growth rate (CAGR) of 7.41%.

AGG’s CAGR is 3.37 percentage points lower than that of IEMG and as a result, would have yielded $1,836 less on a $10,000 investment. Thus, AGG performed worse than IEMG by 3.37% annually.


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