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EEM vs. USMV: What’s The Difference?

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

The expense ratio of EEM is 0.53 percentage points higher than USMV’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 USMV over the past ten years.

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

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Summary

EEMUSMV
NameiShares MSCI Emerging Markets ETFiShares MSCI USA Min Vol Factor ETF
CategoryDiversified Emerging MktsLarge Blend
IssueriSharesiShares
AUM30.33B27.6B
Avg. Return5.47%13.89%
Div. Yield1.48%1.5%
Expense Ratio0.68%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 Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

EEM’s dividend yield is 0.02% lower than that of USMV (1.48% vs. 1.5%). Also, EEM yielded on average 8.42% less per year over the past decade (5.47% vs. 13.89%). The expense ratio of EEM is 0.53 percentage points higher than USMV’s (0.68% vs. 0.15%).

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Fund Composition

Industry Exposure

EEM vs. USMV - Industry Exposure

EEMUSMV
Technology21.36%20.53%
Industrials4.61%10.51%
Energy5.17%0.21%
Communication Services11.76%11.03%
Utilities1.99%6.93%
Healthcare5.06%18.42%
Consumer Defensive5.45%12.82%
Real Estate1.98%2.73%
Financial Services18.39%9.65%
Consumer Cyclical15.16%5.53%
Basic Materials9.07%1.65%

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 Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

EEM is 0.83% more exposed to the Technology sector than USMV (21.36% vs 20.53%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 8.74% higher and 9.63% higher respectively (18.39% vs. 9.65% and 15.16% vs. 5.53%). In total, Utilities, Industrials, and Healthcare also make up 24.20% less of the fund’s holdings compared to USMV (11.66% vs. 35.86%).

Holdings

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

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%.

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

EEMUSMV
Mean Return0.380
R-squared83.50
Std. Deviation17.790
Alpha-2.330
Beta1.080
Sharpe Ratio0.220
Treynor Ratio2.220

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

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

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

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Performance

Annual Returns

EEM vs. USMV - Annual Returns

YearEEMUSMV
202017.56%5.6%
201917.67%27.77%
2018-14.98%1.36%
201736.42%18.97%
201610.51%10.5%
2015-15.41%5.5%
2014-2.82%16.34%
2013-3.14%25.11%
201217.32%11.04%
2011-18.87%0.0%
201015.93%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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

EEM vs. USMV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$14,1175.47%
USMV$10,000$27,60713.89%

A $10,000 investment in EEM would have resulted in a final balance of $14,117. This is a profit of $4,117 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

EEM’s CAGR is 8.42 percentage points lower than that of USMV and as a result, would have yielded $13,490 less on a $10,000 investment. Thus, EEM performed worse than USMV by 8.42% annually.


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