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.

Summary

EEM USMV
Name iShares MSCI Emerging Markets ETF iShares MSCI USA Min Vol Factor ETF
Category Diversified Emerging Mkts Large Blend
Issuer iShares iShares
AUM 30.33B 27.6B
Avg. Return 5.47% 13.89%
Div. Yield 1.48% 1.5%
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 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%).

Fund Composition

Industry Exposure

EEM vs. USMV - Industry Exposure

EEM USMV
Technology 21.36% 20.53%
Industrials 4.61% 10.51%
Energy 5.17% 0.21%
Communication Services 11.76% 11.03%
Utilities 1.99% 6.93%
Healthcare 5.06% 18.42%
Consumer Defensive 5.45% 12.82%
Real Estate 1.98% 2.73%
Financial Services 18.39% 9.65%
Consumer Cyclical 15.16% 5.53%
Basic Materials 9.07% 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 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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

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%.

Risk Analysis

EEM USMV
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 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.

Performance

Annual Returns

EEM vs. USMV - Annual Returns

Year EEM USMV
2020 17.56% 5.6%
2019 17.67% 27.77%
2018 -14.98% 1.36%
2017 36.42% 18.97%
2016 10.51% 10.5%
2015 -15.41% 5.5%
2014 -2.82% 16.34%
2013 -3.14% 25.11%
2012 17.32% 11.04%
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 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

Fund Initial Balance Final Balance CAGR
EEM $10,000 $14,117 5.47%
USMV $10,000 $27,607 13.89%

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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