BSV vs. EEM: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between BSV and EEM? And which fund is better?

The expense ratio of BSV is 0.63 percentage points lower than EEM’s (0.05% vs. 0.68%). BSV is mostly comprised of AAA bonds while EEM has a high exposure to the technology sector. Overall, BSV has provided lower returns than EEM over the past ten years.

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

Summary

BSV EEM
Name Vanguard Short-Term Bond Index Fund ETF Shares iShares MSCI Emerging Markets ETF
Category Short-Term Bond Diversified Emerging Mkts
Issuer Vanguard iShares
AUM 67.71B 30.33B
Avg. Return 2.27% 5.47%
Div. Yield 1.48% 1.48%
Expense Ratio 0.05% 0.68%

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.

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%.

BSV’s dividend yield is 0.00% lower than that of EEM (1.48% vs. 1.48%). Also, BSV yielded on average 3.20% less per year over the past decade (2.27% vs. 5.47%). The expense ratio of BSV is 0.63 percentage points lower than EEM’s (0.05% vs. 0.68%).

Fund Composition

Holdings

BSV - Holdings

BSV Bond Sectors Weight
AAA 71.65%
BBB 13.08%
A 11.95%
AA 3.28%
Others 0.03%
Below B 0.01%
B 0.0%
BB 0.0%
US Government 0.0%

BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.

EEM - Holdings

EEM Holdings Weight
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%
Meituan 1.24%
Vale SA 1.04%
Naspers Ltd Class N 1.04%
Reliance Industries Ltd Shs Dematerialised 0.97%
Infosys Ltd 0.92%
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%.

Risk Analysis

BSV EEM
Mean Return 0.16 0.38
R-squared 78.38 83.5
Std. Deviation 1.33 17.79
Alpha 0.21 -2.33
Beta 0.38 1.08
Sharpe Ratio 0.98 0.22
Treynor Ratio 3.33 2.22

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Alpha of 0.21 with a R-squared of 78.38 and a Mean Return of 0.16. Its Sharpe Ratio is 0.98 while BSV’s Treynor Ratio is 3.33. Furthermore, the fund has a Beta of 0.38 and a Standard Deviation of 1.33.

The iShares MSCI Emerging Markets ETF (EEM) has a Sharpe Ratio of 0.22 with a Beta of 1.08 and a R-squared of 83.5. Its Standard Deviation is 17.79 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Alpha of -2.33 and a Mean Return of 0.38.

BSV’s Mean Return is 0.22 points lower than that of EEM and its R-squared is 5.12 points lower. With a Standard Deviation of 1.33, BSV is slightly less volatile than EEM. The Alpha and Beta of BSV are 2.54 points higher and 0.70 points lower than EEM’s Alpha and Beta.

Performance

Annual Returns

BSV vs. EEM - Annual Returns

Year BSV EEM
2020 4.67% 17.56%
2019 4.92% 17.67%
2018 1.34% -14.98%
2017 1.2% 36.42%
2016 1.42% 10.51%
2015 0.92% -15.41%
2014 1.32% -2.82%
2013 0.17% -3.14%
2012 1.98% 17.32%
2011 3.04% -18.87%
2010 4.0% 15.93%

BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% 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.

Portfolio Growth

BSV vs. EEM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
BSV $10,000 $12,785 2.27%
EEM $10,000 $15,578 5.47%

A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.

BSV’s CAGR is 3.20 percentage points lower than that of EEM and as a result, would have yielded $2,793 less on a $10,000 investment. Thus, BSV performed worse than EEM by 3.20% annually.


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