The iShares MSCI Emerging Markets ETF (EEM) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and ACWI is a iShares N/A fund. So, what’s the difference between EEM and ACWI? And which fund is better?
The expense ratio of EEM is 0.36 percentage points higher than ACWI’s (0.68% vs. 0.32%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than ACWI over the past ten years.
In this article, we’ll compare EEM vs. ACWI. We’ll look at portfolio growth and risk metrics, as well as at their industry exposure and holdings. Moreover, I’ll also discuss EEM’s and ACWI’s fund composition, performance, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||iShares MSCI ACWI ETF|
|Category||Diversified Emerging Mkts||N/A|
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%.
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%.
EEM’s dividend yield is 0.09% higher than that of ACWI (1.48% vs. 1.39%). Also, EEM yielded on average 4.74% less per year over the past decade (5.47% vs. 10.21%). The expense ratio of EEM is 0.36 percentage points higher than ACWI’s (0.68% vs. 0.32%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.
ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.
EEM is 0.95% more exposed to the Technology sector than ACWI (21.36% vs 20.41%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 2.81% higher and 3.15% higher respectively (18.39% vs. 15.58% and 15.16% vs. 12.01%). In total, Utilities, Industrials, and Healthcare also make up 12.34% less of the fund’s holdings compared to ACWI (11.66% vs. 24.00%).
|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%.
|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%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares MSCI Emerging Markets ETF (EEM) has a Alpha of -2.33 with a Standard Deviation of 17.79 and a Beta of 1.08. Its Sharpe Ratio is 0.22 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Mean Return of 0.38 and a R-squared of 83.5.
The iShares MSCI ACWI ETF (ACWI) has a Standard Deviation of 14.05 with a Mean Return of 0.89 and a Sharpe Ratio of 0.71. Its R-squared is 99.96 while ACWI’s Treynor Ratio is 9.45. Furthermore, the fund has a Beta of 1 and a Alpha of 0.15.
EEM’s Mean Return is 0.51 points lower than that of ACWI and its R-squared is 16.46 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than ACWI. The Alpha and Beta of EEM are 2.48 points lower and 0.08 points higher than ACWI’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.
EEM’s CAGR is 4.74 percentage points lower than that of ACWI and as a result, would have yielded $11,663 less on a $10,000 investment. Thus, EEM performed worse than ACWI by 4.74% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.