The iShares MSCI Emerging Markets ETF (EEM) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between EEM and MDY? And which fund is better?
The expense ratio of EEM is 0.45 percentage points higher than MDY’s (0.68% vs. 0.23%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than MDY over the past ten years.
In this article, we’ll compare EEM vs. MDY. We’ll look at holdings and annual returns, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EEM’s and MDY’s industry exposure, risk metrics, and performance and examine how these affect their overall returns.
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Summary
| EEM | MDY | |
| Name | iShares MSCI Emerging Markets ETF | SPDR S&P MIDCAP 400 ETF Trust |
| Category | Diversified Emerging Mkts | Mid-Cap Blend |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 30.33B | 21.31B |
| Avg. Return | 5.47% | 13.29% |
| Div. Yield | 1.48% | 0.94% |
| Expense Ratio | 0.68% | 0.23% |
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.
EEM’s dividend yield is 0.54% higher than that of MDY (1.48% vs. 0.94%). Also, EEM yielded on average 7.82% less per year over the past decade (5.47% vs. 13.29%). The expense ratio of EEM is 0.45 percentage points higher than MDY’s (0.68% vs. 0.23%).
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Fund Composition
Industry Exposure
| EEM | MDY | |
| Technology | 21.36% | 14.74% |
| Industrials | 4.61% | 17.88% |
| Energy | 5.17% | 2.52% |
| Communication Services | 11.76% | 1.63% |
| Utilities | 1.99% | 2.84% |
| Healthcare | 5.06% | 11.17% |
| Consumer Defensive | 5.45% | 4.2% |
| Real Estate | 1.98% | 9.66% |
| Financial Services | 18.39% | 15.2% |
| Consumer Cyclical | 15.16% | 14.89% |
| Basic Materials | 9.07% | 5.27% |
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.
MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.
EEM is 6.62% more exposed to the Technology sector than MDY (21.36% vs 14.74%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 3.19% higher and 0.27% higher respectively (18.39% vs. 15.2% and 15.16% vs. 14.89%). In total, Utilities, Industrials, and Healthcare also make up 20.23% less of the fund’s holdings compared to MDY (11.66% vs. 31.89%).
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%.
| MDY Holdings | Weight |
| Bio-Techne Corp | 0.75% |
| Molina Healthcare Inc | 0.63% |
| Cognex Corp | 0.63% |
| Fair Isaac Corp | 0.62% |
| XPO Logistics Inc | 0.61% |
| SolarEdge Technologies Inc | 0.61% |
| Signature Bank | 0.6% |
| Graco Inc | 0.55% |
| Camden Property Trust | 0.55% |
| FactSet Research Systems Inc | 0.54% |
MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.
SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.
Risk Analysis
| EEM | MDY | |
| Mean Return | 0.38 | 1.08 |
| R-squared | 83.5 | 86.66 |
| Std. Deviation | 17.79 | 16.83 |
| Alpha | -2.33 | -4.1 |
| Beta | 1.08 | 1.15 |
| Sharpe Ratio | 0.22 | 0.73 |
| Treynor Ratio | 2.22 | 9.97 |
The iShares MSCI Emerging Markets ETF (EEM) has a Beta of 1.08 with a Treynor Ratio of 2.22 and a Sharpe Ratio of 0.22. Its Mean Return is 0.38 while EEM’s R-squared is 83.5. Furthermore, the fund has a Alpha of -2.33 and a Standard Deviation of 17.79.
The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Treynor Ratio of 9.97 with a Standard Deviation of 16.83 and a Mean Return of 1.08. Its Beta is 1.15 while MDY’s Sharpe Ratio is 0.73. Furthermore, the fund has a Alpha of -4.1 and a R-squared of 86.66.
EEM’s Mean Return is 0.70 points lower than that of MDY and its R-squared is 3.16 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than MDY. The Alpha and Beta of EEM are 1.77 points higher and 0.07 points lower than MDY’s Alpha and Beta.
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Performance
Annual Returns
| Year | EEM | MDY |
| 2020 | 17.56% | 13.51% |
| 2019 | 17.67% | 25.86% |
| 2018 | -14.98% | -11.28% |
| 2017 | 36.42% | 15.89% |
| 2016 | 10.51% | 20.33% |
| 2015 | -15.41% | -2.4% |
| 2014 | -2.82% | 9.42% |
| 2013 | -3.14% | 33.08% |
| 2012 | 17.32% | 17.58% |
| 2011 | -18.87% | -1.99% |
| 2010 | 15.93% | 26.17% |
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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| MDY | $10,000 | $36,524 | 13.29% |
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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.
EEM’s CAGR is 7.82 percentage points lower than that of MDY and as a result, would have yielded $20,946 less on a $10,000 investment. Thus, EEM performed worse than MDY by 7.82% annually.
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