The iShares MSCI Emerging Markets ETF (EEM) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between EEM and EFV? And which fund is better?
The expense ratio of EEM is 0.29 percentage points higher than EFV’s (0.68% vs. 0.39%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided higher returns than EFV over the past ten years.
In this article, we’ll compare EEM vs. EFV. We’ll look at fund composition and portfolio growth, as well as at their annual returns and performance. Moreover, I’ll also discuss EEM’s and EFV’s industry exposure, risk metrics, and holdings and examine how these affect their overall returns.
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Summary
| EEM | EFV | |
| Name | iShares MSCI Emerging Markets ETF | iShares MSCI EAFE Value ETF |
| Category | Diversified Emerging Mkts | Foreign Large Value |
| Issuer | iShares | iShares |
| AUM | 30.33B | 14.37B |
| Avg. Return | 5.47% | 3.99% |
| Div. Yield | 1.48% | 2.94% |
| Expense Ratio | 0.68% | 0.39% |
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 EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.
EEM’s dividend yield is 1.46% lower than that of EFV (1.48% vs. 2.94%). Also, EEM yielded on average 1.48% more per year over the past decade (5.47% vs. 3.99%). The expense ratio of EEM is 0.29 percentage points higher than EFV’s (0.68% vs. 0.39%).
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Fund Composition
Industry Exposure
| EEM | EFV | |
| Technology | 21.36% | 2.98% |
| Industrials | 4.61% | 11.6% |
| Energy | 5.17% | 6.6% |
| Communication Services | 11.76% | 6.46% |
| Utilities | 1.99% | 6.14% |
| Healthcare | 5.06% | 9.19% |
| Consumer Defensive | 5.45% | 6.82% |
| Real Estate | 1.98% | 5.06% |
| Financial Services | 18.39% | 26.55% |
| Consumer Cyclical | 15.16% | 9.0% |
| Basic Materials | 9.07% | 9.59% |
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 EAFE Value ETF (EFV) has the most exposure to the Financial Services sector at 26.55%. This is followed by Industrials and Basic Materials at 11.6% and 9.59% respectively. Real Estate (5.06%), Utilities (6.14%), and Communication Services (6.46%) only make up 17.66% of the fund’s total assets.
EFV’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Consumer Cyclical, Healthcare, and Basic Materials stocks at 6.6%, 6.82%, 9.0%, 9.19%, and 9.59%.
EEM is 18.38% more exposed to the Technology sector than EFV (21.36% vs 2.98%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 8.16% lower and 6.16% higher respectively (18.39% vs. 26.55% and 15.16% vs. 9.0%). In total, Utilities, Industrials, and Healthcare also make up 15.27% less of the fund’s holdings compared to EFV (11.66% vs. 26.93%).
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%.
| EFV Holdings | Weight |
| Novartis AG | 2.41% |
| Toyota Motor Corp | 2.21% |
| Commonwealth Bank of Australia | 1.59% |
| Siemens AG | 1.45% |
| Sanofi SA | 1.42% |
| HSBC Holdings PLC | 1.4% |
| TotalEnergies SE | 1.35% |
| Allianz SE | 1.23% |
| GlaxoSmithKline PLC | 1.18% |
| Rio Tinto PLC | 1.1% |
EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.
HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.
Risk Analysis
| EEM | EFV | |
| Mean Return | 0.38 | 0.42 |
| R-squared | 83.5 | 92.15 |
| Std. Deviation | 17.79 | 16.53 |
| Alpha | -2.33 | -1.77 |
| Beta | 1.08 | 1.05 |
| Sharpe Ratio | 0.22 | 0.26 |
| Treynor Ratio | 2.22 | 2.92 |
The iShares MSCI Emerging Markets ETF (EEM) has a Standard Deviation of 17.79 with a R-squared of 83.5 and a Alpha of -2.33. Its Treynor Ratio is 2.22 while EEM’s Sharpe Ratio is 0.22. Furthermore, the fund has a Beta of 1.08 and a Mean Return of 0.38.
The iShares MSCI EAFE Value ETF (EFV) has a Alpha of -1.77 with a Standard Deviation of 16.53 and a R-squared of 92.15. Its Sharpe Ratio is 0.26 while EFV’s Mean Return is 0.42. Furthermore, the fund has a Treynor Ratio of 2.92 and a Beta of 1.05.
EEM’s Mean Return is 0.04 points lower than that of EFV and its R-squared is 8.65 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than EFV. The Alpha and Beta of EEM are 0.56 points lower and 0.03 points higher than EFV’s Alpha and Beta.
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Performance
Annual Returns
| Year | EEM | EFV |
| 2020 | 17.56% | -2.78% |
| 2019 | 17.67% | 15.97% |
| 2018 | -14.98% | -14.88% |
| 2017 | 36.42% | 21.22% |
| 2016 | 10.51% | 4.87% |
| 2015 | -15.41% | -5.89% |
| 2014 | -2.82% | -5.65% |
| 2013 | -3.14% | 22.61% |
| 2012 | 17.32% | 17.52% |
| 2011 | -18.87% | -12.24% |
| 2010 | 15.93% | 3.18% |
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 2013 was the strongest year for EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| EFV | $10,000 | $14,134 | 3.99% |
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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.
EEM’s CAGR is 1.48 percentage points higher than that of EFV and as a result, would have yielded $1,444 more on a $10,000 investment. Thus, EEM outperformed EFV by 1.48% annually.
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