The iShares MSCI Emerging Markets ETF (EEM) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and IWN is a iShares Small Value fund. So, what’s the difference between EEM and IWN? And which fund is better?
The expense ratio of EEM is 0.44 percentage points higher than IWN’s (0.68% vs. 0.24%). EEM also has a higher exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than IWN over the past ten years.
In this article, we’ll compare EEM vs. IWN. We’ll look at risk metrics and holdings, as well as at their performance and industry exposure. Moreover, I’ll also discuss EEM’s and IWN’s portfolio growth, annual returns, and fund composition and examine how these affect their overall returns.
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Summary
| EEM | IWN | |
| Name | iShares MSCI Emerging Markets ETF | iShares Russell 2000 Value ETF |
| Category | Diversified Emerging Mkts | Small Value |
| Issuer | iShares | iShares |
| AUM | 30.33B | 15.48B |
| Avg. Return | 5.47% | 10.96% |
| Div. Yield | 1.48% | 1.26% |
| Expense Ratio | 0.68% | 0.24% |
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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.
EEM’s dividend yield is 0.22% higher than that of IWN (1.48% vs. 1.26%). Also, EEM yielded on average 5.49% less per year over the past decade (5.47% vs. 10.96%). The expense ratio of EEM is 0.44 percentage points higher than IWN’s (0.68% vs. 0.24%).
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Fund Composition
Industry Exposure
| EEM | IWN | |
| Technology | 21.36% | 6.02% |
| Industrials | 4.61% | 14.58% |
| Energy | 5.17% | 5.84% |
| Communication Services | 11.76% | 4.17% |
| Utilities | 1.99% | 4.69% |
| Healthcare | 5.06% | 10.94% |
| Consumer Defensive | 5.45% | 3.77% |
| Real Estate | 1.98% | 14.36% |
| Financial Services | 18.39% | 22.97% |
| Consumer Cyclical | 15.16% | 8.39% |
| Basic Materials | 9.07% | 4.29% |
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 Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.
IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.
EEM is 15.34% more exposed to the Technology sector than IWN (21.36% vs 6.02%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 4.58% lower and 6.77% higher respectively (18.39% vs. 22.97% and 15.16% vs. 8.39%). In total, Utilities, Industrials, and Healthcare also make up 18.55% less of the fund’s holdings compared to IWN (11.66% vs. 30.21%).
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%.
| IWN Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 1.06% |
| Tenet Healthcare Corp | 0.47% |
| Stag Industrial Inc | 0.47% |
| Ovintiv Inc | 0.45% |
| EMCOR Group Inc | 0.42% |
| Valley National Bancorp | 0.37% |
| Chesapeake Energy Corp Ordinary Shares – New | 0.37% |
| Agree Realty Corp | 0.36% |
| Macy’s Inc | 0.35% |
| Essent Group Ltd | 0.35% |
IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.
Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.
Risk Analysis
| EEM | IWN | |
| Mean Return | 0.38 | 1.01 |
| R-squared | 83.5 | 72.64 |
| Std. Deviation | 17.79 | 19.28 |
| Alpha | -2.33 | -6.32 |
| Beta | 1.08 | 1.21 |
| Sharpe Ratio | 0.22 | 0.59 |
| Treynor Ratio | 2.22 | 8.3 |
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a R-squared of 83.5 and a Standard Deviation of 17.79. Its Alpha is -2.33 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Beta of 1.08 and a Sharpe Ratio of 0.22.
The iShares Russell 2000 Value ETF (IWN) has a Standard Deviation of 19.28 with a Beta of 1.21 and a Alpha of -6.32. Its R-squared is 72.64 while IWN’s Sharpe Ratio is 0.59. Furthermore, the fund has a Treynor Ratio of 8.3 and a Mean Return of 1.01.
EEM’s Mean Return is 0.63 points lower than that of IWN and its R-squared is 10.86 points higher. With a Standard Deviation of 17.79, EEM is slightly less volatile than IWN. The Alpha and Beta of EEM are 3.99 points higher and 0.13 points lower than IWN’s Alpha and Beta.
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Performance
Annual Returns
| Year | EEM | IWN |
| 2020 | 17.56% | 4.5% |
| 2019 | 17.67% | 22.17% |
| 2018 | -14.98% | -12.94% |
| 2017 | 36.42% | 7.73% |
| 2016 | 10.51% | 31.64% |
| 2015 | -15.41% | -7.53% |
| 2014 | -2.82% | 4.13% |
| 2013 | -3.14% | 34.3% |
| 2012 | 17.32% | 17.92% |
| 2011 | -18.87% | -5.64% |
| 2010 | 15.93% | 24.29% |
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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| IWN | $10,000 | $28,189 | 10.96% |
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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.
EEM’s CAGR is 5.49 percentage points lower than that of IWN and as a result, would have yielded $12,611 less on a $10,000 investment. Thus, EEM performed worse than IWN by 5.49% annually.
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