The iShares MSCI Emerging Markets ETF (EEM) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and IAU is a iShares N/A fund. So, what’s the difference between EEM and IAU? And which fund is better?
The expense ratio of EEM is 0.43 percentage points higher than IAU’s (0.68% vs. 0.25%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than IAU over the past ten years.
In this article, we’ll compare EEM vs. IAU. We’ll look at risk metrics and holdings, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss EEM’s and IAU’s performance, industry exposure, and fund composition and examine how these affect their overall returns.
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Summary
| EEM | IAU | |
| Name | iShares MSCI Emerging Markets ETF | iShares Gold Trust |
| Category | Diversified Emerging Mkts | N/A |
| Issuer | iShares | iShares |
| AUM | 30.33B | 28.61B |
| Avg. Return | 5.47% | 6.03% |
| Div. Yield | 1.48% | 0.0% |
| Expense Ratio | 0.68% | 0.25% |
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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.
EEM’s dividend yield is 1.48% higher than that of IAU (1.48% vs. 0.0%). Also, EEM yielded on average 0.56% less per year over the past decade (5.47% vs. 6.03%). The expense ratio of EEM is 0.43 percentage points higher than IAU’s (0.68% vs. 0.25%).
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Fund Composition
Industry Exposure
| EEM | IAU | |
| Technology | 21.36% | 0.0% |
| Industrials | 4.61% | 0.0% |
| Energy | 5.17% | 0.0% |
| Communication Services | 11.76% | 0.0% |
| Utilities | 1.99% | 0.0% |
| Healthcare | 5.06% | 0.0% |
| Consumer Defensive | 5.45% | 0.0% |
| Real Estate | 1.98% | 0.0% |
| Financial Services | 18.39% | 0.0% |
| Consumer Cyclical | 15.16% | 0.0% |
| Basic Materials | 9.07% | 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 iShares Gold Trust (IAU) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
IAU’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
EEM is 21.36% more exposed to the Technology sector than IAU (21.36% vs 0.0%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.39% higher and 15.16% higher respectively (18.39% vs. 0.0% and 15.16% vs. 0.0%). In total, Utilities, Industrials, and Healthcare also make up 11.66% more of the fund’s holdings compared to IAU (11.66% vs. 0.00%).
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%.
| IAU Holdings | Weight |
| Gold | 100.0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.
N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.
Risk Analysis
| EEM | IAU | |
| Mean Return | 0.38 | 0.23 |
| R-squared | 83.5 | 16.03 |
| Std. Deviation | 17.79 | 16.97 |
| Alpha | -2.33 | 4.16 |
| Beta | 1.08 | 0.48 |
| Sharpe Ratio | 0.22 | 0.13 |
| Treynor Ratio | 2.22 | 1.5 |
The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Beta of 1.08 and a R-squared of 83.5. Its Mean Return is 0.38 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Sharpe Ratio of 0.22 and a Alpha of -2.33.
The iShares Gold Trust (IAU) has a Standard Deviation of 16.97 with a R-squared of 16.03 and a Alpha of 4.16. Its Sharpe Ratio is 0.13 while IAU’s Beta is 0.48. Furthermore, the fund has a Mean Return of 0.23 and a Treynor Ratio of 1.5.
EEM’s Mean Return is 0.15 points higher than that of IAU and its R-squared is 67.47 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than IAU. The Alpha and Beta of EEM are 6.49 points lower and 0.60 points higher than IAU’s Alpha and Beta.
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Performance
Annual Returns
| Year | EEM | IAU |
| 2020 | 17.56% | 23.86% |
| 2019 | 17.67% | 18.54% |
| 2018 | -14.98% | -1.39% |
| 2017 | 36.42% | 11.58% |
| 2016 | 10.51% | 8.85% |
| 2015 | -15.41% | -11.65% |
| 2014 | -2.82% | -0.44% |
| 2013 | -3.14% | -27.96% |
| 2012 | 17.32% | 8.37% |
| 2011 | -18.87% | 8.66% |
| 2010 | 15.93% | 27.93% |
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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| IAU | $10,000 | $16,786 | 6.03% |
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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.
EEM’s CAGR is 0.56 percentage points lower than that of IAU and as a result, would have yielded $1,208 less on a $10,000 investment. Thus, EEM performed worse than IAU by 0.56% annually.
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