The Vanguard Total International Bond Index Fund ETF Shares (BNDX) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. BNDX is a Vanguard N/A fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between BNDX and EEM? And which fund is better?
The expense ratio of BNDX is 0.60 percentage points lower than EEM’s (0.08% vs. 0.68%). BNDX is mostly comprised of A bonds while EEM has a high exposure to the technology sector. Overall, BNDX has provided lower returns than EEM over the past ten years.
In this article, we’ll compare BNDX vs. EEM. We’ll look at holdings and performance, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss BNDX’s and EEM’s annual returns, fund composition, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard Total International Bond Index Fund ETF Shares||iShares MSCI Emerging Markets ETF|
|Category||N/A||Diversified Emerging Mkts|
The Vanguard Total International Bond Index Fund ETF Shares (BNDX) is a N/A fund that is issued by Vanguard. It currently has 116.41B total assets under management and has yielded an average annual return of 4.63% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.08%.
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
BNDX’s dividend yield is 0.54% lower than that of EEM (0.94% vs. 1.48%). Also, BNDX yielded on average 0.84% less per year over the past decade (4.63% vs. 5.47%). The expense ratio of BNDX is 0.60 percentage points lower than EEM’s (0.08% vs. 0.68%).
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|BNDX Bond Sectors||Weight|
BNDX’s Top Bond Sectors are ratings of A, AA, AAA, BBB, and Others at 29.19%, 26.79%, 21.59%, 19.41%, and 1.57%. The fund is less weighted towards Below B (1.45%), B (0.0%), and BB (0.0%) rated bonds.
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
The Vanguard Total International Bond Index Fund ETF Shares (BNDX) has a Sharpe Ratio of 0 with a Beta of 0 and a R-squared of 0. Its Mean Return is 0 while BNDX’s Treynor Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.
The iShares MSCI Emerging Markets ETF (EEM) has a Standard Deviation of 17.79 with a Treynor Ratio of 2.22 and a Mean Return of 0.38. Its R-squared is 83.5 while EEM’s Sharpe Ratio is 0.22. Furthermore, the fund has a Beta of 1.08 and a Alpha of -2.33.
BNDX’s Mean Return is 0.38 points lower than that of EEM and its R-squared is 83.50 points lower. With a Standard Deviation of 0, BNDX is slightly less volatile than EEM. The Alpha and Beta of BNDX are 2.33 points higher and 1.08 points lower than EEM’s Alpha and Beta.
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BNDX had its best year in 2014 with an annual return of 8.83%. BNDX’s worst year over the past decade yielded 0.0% and occurred in 2013. In most years the Vanguard Total International Bond Index Fund ETF Shares provided moderate returns such as in 2015, 2017, and 2018 where annual returns amounted to 1.08%, 2.4%, and 2.94% respectively.
The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in BNDX would have resulted in a final balance of $13,695. This is a profit of $3,695 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.63%.
With a $10,000 investment in EEM, the end total would have been $14,575. This equates to a $4,575 profit over 7 years and a compound annual growth rate (CAGR) of 5.47%.
BNDX’s CAGR is 0.84 percentage points lower than that of EEM and as a result, would have yielded $880 less on a $10,000 investment. Thus, BNDX performed worse than EEM by 0.84% annually.
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