The iShares MSCI Emerging Markets ETF (EEM) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between EEM and EMB? And which fund is better?
The expense ratio of EEM is 0.29 percentage points higher than EMB’s (0.68% vs. 0.39%). EEM also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, EEM has provided lower returns than EMB over the past ten years.
In this article, we’ll compare EEM vs. EMB. We’ll look at holdings and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss EEM’s and EMB’s risk metrics, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| EEM | EMB | |
| Name | iShares MSCI Emerging Markets ETF | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Diversified Emerging Mkts | Emerging Markets Bond |
| Issuer | iShares | iShares |
| AUM | 30.33B | 19.76B |
| Avg. Return | 5.47% | 6.43% |
| Div. Yield | 1.48% | 3.85% |
| 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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
EEM’s dividend yield is 2.37% lower than that of EMB (1.48% vs. 3.85%). Also, EEM yielded on average 0.96% less per year over the past decade (5.47% vs. 6.43%). The expense ratio of EEM is 0.29 percentage points higher than EMB’s (0.68% vs. 0.39%).
Fund Composition
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%.
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
Risk Analysis
| EEM | EMB | |
| Mean Return | 0.38 | 0.44 |
| R-squared | 83.5 | 23.34 |
| Std. Deviation | 17.79 | 8.44 |
| Alpha | -2.33 | 0.89 |
| Beta | 1.08 | 1.36 |
| Sharpe Ratio | 0.22 | 0.55 |
| Treynor Ratio | 2.22 | 3.24 |
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a R-squared of 83.5 and a Sharpe Ratio of 0.22. Its Alpha is -2.33 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Beta of 1.08 and a Treynor Ratio of 2.22.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a R-squared of 23.34 with a Sharpe Ratio of 0.55 and a Alpha of 0.89. Its Standard Deviation is 8.44 while EMB’s Treynor Ratio is 3.24. Furthermore, the fund has a Beta of 1.36 and a Mean Return of 0.44.
EEM’s Mean Return is 0.06 points lower than that of EMB and its R-squared is 60.16 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than EMB. The Alpha and Beta of EEM are 3.22 points lower and 0.28 points lower than EMB’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | EMB |
| 2020 | 17.56% | 5.48% |
| 2019 | 17.67% | 15.57% |
| 2018 | -14.98% | -5.67% |
| 2017 | 36.42% | 9.98% |
| 2016 | 10.51% | 9.41% |
| 2015 | -15.41% | 0.43% |
| 2014 | -2.82% | 6.69% |
| 2013 | -3.14% | -7.42% |
| 2012 | 17.32% | 17.64% |
| 2011 | -18.87% | 7.2% |
| 2010 | 15.93% | 11.47% |
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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| EMB | $10,000 | $19,295 | 6.43% |
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 EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
EEM’s CAGR is 0.96 percentage points lower than that of EMB and as a result, would have yielded $3,717 less on a $10,000 investment. Thus, EEM performed worse than EMB by 0.96% annually.
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