The iShares MSCI Emerging Markets ETF (EEM) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and IEF is a iShares Long Government fund. So, what’s the difference between EEM and IEF? And which fund is better?
The expense ratio of EEM is 0.53 percentage points higher than IEF’s (0.68% vs. 0.15%). EEM also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, EEM has provided higher returns than IEF over the past ten years.
In this article, we’ll compare EEM vs. IEF. We’ll look at industry exposure and fund composition, as well as at their performance and portfolio growth. Moreover, I’ll also discuss EEM’s and IEF’s risk metrics, holdings, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||Diversified Emerging Mkts||Long Government|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
EEM’s dividend yield is 0.64% higher than that of IEF (1.48% vs. 0.84%). Also, EEM yielded on average 0.41% more per year over the past decade (5.47% vs. 5.06%). The expense ratio of EEM is 0.53 percentage points higher than IEF’s (0.68% vs. 0.15%).
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|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%.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares MSCI Emerging Markets ETF (EEM) has a Standard Deviation of 17.79 with a Sharpe Ratio of 0.22 and a Beta of 1.08. Its Treynor Ratio is 2.22 while EEM’s Alpha is -2.33. Furthermore, the fund has a Mean Return of 0.38 and a R-squared of 83.5.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Beta of 1.59 and a Sharpe Ratio of 0.6. Its Mean Return is 0.32 while IEF’s R-squared is 77.56. Furthermore, the fund has a Alpha of -1.2 and a Standard Deviation of 5.42.
EEM’s Mean Return is 0.06 points higher than that of IEF and its R-squared is 5.94 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than IEF. The Alpha and Beta of EEM are 1.13 points lower and 0.51 points lower than IEF’s Alpha and Beta.
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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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% 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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
EEM’s CAGR is 0.41 percentage points higher than that of IEF and as a result, would have yielded $1,358 less on a $10,000 investment. Thus, EEM outperformed IEF by 0.41% annually.
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