EEM vs. MTUM: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and MTUM is a iShares Large Growth fund. So, what’s the difference between EEM and MTUM? And which fund is better?

The expense ratio of EEM is 0.53 percentage points higher than MTUM’s (0.68% vs. 0.15%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than MTUM over the past ten years.

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

Summary

EEM MTUM
Name iShares MSCI Emerging Markets ETF iShares MSCI USA Momentum Factor ETF
Category Diversified Emerging Mkts Large Growth
Issuer iShares iShares
AUM 30.33B 14.53B
Avg. Return 5.47% 17.37%
Div. Yield 1.48% 0.44%
Expense Ratio 0.68% 0.15%

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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

EEM’s dividend yield is 1.04% higher than that of MTUM (1.48% vs. 0.44%). Also, EEM yielded on average 11.90% less per year over the past decade (5.47% vs. 17.37%). The expense ratio of EEM is 0.53 percentage points higher than MTUM’s (0.68% vs. 0.15%).

Fund Composition

Industry Exposure

EEM vs. MTUM - Industry Exposure

EEM MTUM
Technology 21.36% 15.24%
Industrials 4.61% 12.47%
Energy 5.17% 1.77%
Communication Services 11.76% 13.18%
Utilities 1.99% 0.19%
Healthcare 5.06% 6.41%
Consumer Defensive 5.45% 2.88%
Real Estate 1.98% 0.43%
Financial Services 18.39% 34.32%
Consumer Cyclical 15.16% 9.96%
Basic Materials 9.07% 3.15%

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 MSCI USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.

MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.

EEM is 6.12% more exposed to the Technology sector than MTUM (21.36% vs 15.24%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 15.93% lower and 5.20% higher respectively (18.39% vs. 34.32% and 15.16% vs. 9.96%). In total, Utilities, Industrials, and Healthcare also make up 7.41% less of the fund’s holdings compared to MTUM (11.66% vs. 19.07%).

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%.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

Risk Analysis

EEM MTUM
Mean Return 0.38 0
R-squared 83.5 0
Std. Deviation 17.79 0
Alpha -2.33 0
Beta 1.08 0
Sharpe Ratio 0.22 0
Treynor Ratio 2.22 0

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

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Standard Deviation of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while MTUM’s Mean Return is 0. Furthermore, the fund has a Beta of 0 and a Alpha of 0.

EEM’s Mean Return is 0.38 points higher than that of MTUM and its R-squared is 83.50 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than MTUM. The Alpha and Beta of EEM are 2.33 points lower and 1.08 points higher than MTUM’s Alpha and Beta.

Performance

Annual Returns

EEM vs. MTUM - Annual Returns

Year EEM MTUM
2020 17.56% 29.69%
2019 17.67% 27.57%
2018 -14.98% -1.77%
2017 36.42% 37.6%
2016 10.51% 4.89%
2015 -15.41% 9.12%
2014 -2.82% 14.48%
2013 -3.14% 0.0%
2012 17.32% 0.0%
2011 -18.87% 0.0%
2010 15.93% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

EEM vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EEM $10,000 $14,575 5.47%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in EEM would have resulted in a final balance of $14,575. This is a profit of $4,575 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

EEM’s CAGR is 11.90 percentage points lower than that of MTUM and as a result, would have yielded $14,726 less on a $10,000 investment. Thus, EEM performed worse than MTUM by 11.90% annually.


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