EEM vs. MBB: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between EEM and MBB? And which fund is better?

The expense ratio of EEM is 0.62 percentage points higher than MBB’s (0.68% vs. 0.06%). EEM also has a high exposure to the technology sector while MBB is mostly comprised of AAA bonds. Overall, EEM has provided higher returns than MBB over the past ten years.

In this article, we’ll compare EEM vs. MBB. We’ll look at industry exposure and annual returns, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss EEM’s and MBB’s performance, risk metrics, and fund composition and examine how these affect their overall returns.

Summary

EEM MBB
Name iShares MSCI Emerging Markets ETF iShares MBS ETF
Category Diversified Emerging Mkts Intermediate Government
Issuer iShares iShares
AUM 30.33B 25.69B
Avg. Return 5.47% 3.08%
Div. Yield 1.48% 1.88%
Expense Ratio 0.68% 0.06%

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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

EEM’s dividend yield is 0.40% lower than that of MBB (1.48% vs. 1.88%). Also, EEM yielded on average 2.40% more per year over the past decade (5.47% vs. 3.08%). The expense ratio of EEM is 0.62 percentage points higher than MBB’s (0.68% vs. 0.06%).

Fund Composition

Holdings

EEM - 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%.

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.

Risk Analysis

EEM MBB
Mean Return 0.38 0.2
R-squared 83.5 74.38
Std. Deviation 17.79 2.12
Alpha -2.33 0.14
Beta 1.08 0.6
Sharpe Ratio 0.22 0.87
Treynor Ratio 2.22 3.02

The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Alpha of -2.33 and a Sharpe Ratio of 0.22. Its Standard Deviation is 17.79 while EEM’s Mean Return is 0.38. Furthermore, the fund has a R-squared of 83.5 and a Beta of 1.08.

The iShares MBS ETF (MBB) has a Standard Deviation of 2.12 with a Sharpe Ratio of 0.87 and a Mean Return of 0.2. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Treynor Ratio of 3.02 and a Beta of 0.6.

EEM’s Mean Return is 0.18 points higher than that of MBB and its R-squared is 9.12 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than MBB. The Alpha and Beta of EEM are 2.47 points lower and 0.48 points higher than MBB’s Alpha and Beta.

Performance

Annual Returns

EEM vs. MBB - Annual Returns

Year EEM MBB
2020 17.56% 4.03%
2019 17.67% 6.27%
2018 -14.98% 0.81%
2017 36.42% 2.37%
2016 10.51% 1.28%
2015 -15.41% 1.28%
2014 -2.82% 6.16%
2013 -3.14% -1.92%
2012 17.32% 2.23%
2011 -18.87% 5.88%
2010 15.93% 5.44%

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 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

EEM vs. MBB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EEM $10,000 $15,578 5.47%
MBB $10,000 $13,906 3.08%

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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

EEM’s CAGR is 2.40 percentage points higher than that of MBB and as a result, would have yielded $1,672 more on a $10,000 investment. Thus, EEM outperformed MBB by 2.40% annually.


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