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EEM vs. ARKK: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between EEM and ARKK? And which fund is better?

The expense ratio of EEM is 0.07 percentage points lower than ARKK’s (0.68% vs. 0.75%). EEM also has a lower exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than ARKK over the past ten years.

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

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Summary

EEMARKK
NameiShares MSCI Emerging Markets ETFARK Innovation ETF
CategoryDiversified Emerging MktsMid-Cap Growth
IssueriSharesARK ETF Trust
AUM30.33B25.52B
Avg. Return5.47%55.45%
Div. Yield1.48%0.0%
Expense Ratio0.68%0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

EEM’s dividend yield is 1.48% higher than that of ARKK (1.48% vs. 0.0%). Also, EEM yielded on average 49.98% less per year over the past decade (5.47% vs. 55.45%). The expense ratio of EEM is 0.07 percentage points lower than ARKK’s (0.68% vs. 0.75%).

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Fund Composition

Industry Exposure

EEM vs. ARKK - Industry Exposure

EEMARKK
Technology21.36%30.5%
Industrials4.61%2.11%
Energy5.17%0.0%
Communication Services11.76%25.01%
Utilities1.99%0.0%
Healthcare5.06%29.47%
Consumer Defensive5.45%0.93%
Real Estate1.98%0.51%
Financial Services18.39%0.04%
Consumer Cyclical15.16%11.42%
Basic Materials9.07%0.0%

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 ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

EEM is 9.14% less exposed to the Technology sector than ARKK (21.36% vs 30.5%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.35% higher and 3.74% higher respectively (18.39% vs. 0.04% and 15.16% vs. 11.42%). In total, Utilities, Industrials, and Healthcare also make up 19.92% less of the fund’s holdings compared to ARKK (11.66% vs. 31.58%).

Holdings

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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%.

ARKK - Holdings

ARKK HoldingsWeight
Tesla Inc9.56%
Roku Inc Class A6.48%
Teladoc Health Inc5.76%
Square Inc A4.37%
Zoom Video Communications Inc4.36%
Shopify Inc A4.27%
Spotify Technology SA3.68%
Twilio Inc A3.66%
Coinbase Global Inc Ordinary Shares – Class A3.65%
Unity Software Inc Ordinary Shares3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

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Risk Analysis

EEMARKK
Mean Return0.380
R-squared83.50
Std. Deviation17.790
Alpha-2.330
Beta1.080
Sharpe Ratio0.220
Treynor Ratio2.220

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

The ARK Innovation ETF (ARKK) has a Alpha of 0 with a Mean Return of 0 and a R-squared of 0. Its Sharpe Ratio is 0 while ARKK’s Standard Deviation is 0. Furthermore, the fund has a Beta of 0 and a Treynor Ratio of 0.

EEM’s Mean Return is 0.38 points higher than that of ARKK and its R-squared is 83.50 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than ARKK. The Alpha and Beta of EEM are 2.33 points lower and 1.08 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. ARKK - Annual Returns

YearEEMARKK
202017.56%152.52%
201917.67%35.73%
2018-14.98%3.58%
201736.42%87.38%
201610.51%-1.96%
2015-15.41%3.76%
2014-2.82%0.0%
2013-3.14%0.0%
201217.32%0.0%
2011-18.87%0.0%
201015.93%0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

EEM vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$17,7305.47%
ARKK$10,000$65,21855.45%

A $10,000 investment in EEM would have resulted in a final balance of $17,730. This is a profit of $7,730 over 5 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

EEM’s CAGR is 49.98 percentage points lower than that of ARKK and as a result, would have yielded $47,488 less on a $10,000 investment. Thus, EEM performed worse than ARKK by 49.98% annually.


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