The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and VBR is a Vanguard Small Value fund. So, what’s the difference between EEM and VBR? And which fund is better?
The expense ratio of EEM is 0.61 percentage points higher than VBR’s (0.68% vs. 0.07%). EEM also has a higher exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than VBR over the past ten years.
In this article, we’ll compare EEM vs. VBR. We’ll look at annual returns and fund composition, as well as at their portfolio growth and performance. Moreover, I’ll also discuss EEM’s and VBR’s holdings, risk metrics, and industry exposure and examine how these affect their overall returns.
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Summary
| EEM | VBR | |
| Name | iShares MSCI Emerging Markets ETF | Vanguard Small-Cap Value Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Small Value |
| Issuer | iShares | Vanguard |
| AUM | 30.33B | 48.08B |
| Avg. Return | 5.47% | 12.28% |
| Div. Yield | 1.48% | 1.6% |
| Expense Ratio | 0.68% | 0.07% |
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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
EEM’s dividend yield is 0.12% lower than that of VBR (1.48% vs. 1.6%). Also, EEM yielded on average 6.81% less per year over the past decade (5.47% vs. 12.28%). The expense ratio of EEM is 0.61 percentage points higher than VBR’s (0.68% vs. 0.07%).
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Fund Composition
Industry Exposure
| EEM | VBR | |
| Technology | 21.36% | 8.39% |
| Industrials | 4.61% | 18.44% |
| Energy | 5.17% | 5.15% |
| Communication Services | 11.76% | 1.77% |
| Utilities | 1.99% | 3.65% |
| Healthcare | 5.06% | 7.16% |
| Consumer Defensive | 5.45% | 4.36% |
| Real Estate | 1.98% | 10.92% |
| Financial Services | 18.39% | 20.04% |
| Consumer Cyclical | 15.16% | 13.82% |
| Basic Materials | 9.07% | 6.31% |
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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.
VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.
EEM is 12.97% more exposed to the Technology sector than VBR (21.36% vs 8.39%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 1.65% lower and 1.34% higher respectively (18.39% vs. 20.04% and 15.16% vs. 13.82%). In total, Utilities, Industrials, and Healthcare also make up 17.59% less of the fund’s holdings compared to VBR (11.66% vs. 29.25%).
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%.
| VBR Holdings | Weight |
| Diamondback Energy Inc | 0.55% |
| VICI Properties Inc Ordinary Shares | 0.54% |
| IDEX Corp | 0.54% |
| Nuance Communications Inc | 0.5% |
| Molina Healthcare Inc | 0.48% |
| Signature Bank | 0.46% |
| Novavax Inc | 0.44% |
| Howmet Aerospace Inc | 0.44% |
| Apollo Global Management Inc Class A | 0.42% |
| Brown & Brown Inc | 0.41% |
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
Risk Analysis
| EEM | VBR | |
| Mean Return | 0.38 | 1.08 |
| R-squared | 83.5 | 82.2 |
| Std. Deviation | 17.79 | 18.37 |
| Alpha | -2.33 | -5.09 |
| Beta | 1.08 | 1.23 |
| Sharpe Ratio | 0.22 | 0.67 |
| Treynor Ratio | 2.22 | 9.15 |
The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Standard Deviation of 17.79 and a Sharpe Ratio of 0.22. Its Mean Return is 0.38 while EEM’s Alpha is -2.33. Furthermore, the fund has a R-squared of 83.5 and a Beta of 1.08.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Treynor Ratio of 9.15 with a Mean Return of 1.08 and a Standard Deviation of 18.37. Its Beta is 1.23 while VBR’s Sharpe Ratio is 0.67. Furthermore, the fund has a Alpha of -5.09 and a R-squared of 82.2.
EEM’s Mean Return is 0.70 points lower than that of VBR and its R-squared is 1.30 points higher. With a Standard Deviation of 17.79, EEM is slightly less volatile than VBR. The Alpha and Beta of EEM are 2.76 points higher and 0.15 points lower than VBR’s Alpha and Beta.
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Performance
Annual Returns
| Year | EEM | VBR |
| 2020 | 17.56% | 5.82% |
| 2019 | 17.67% | 22.76% |
| 2018 | -14.98% | -12.22% |
| 2017 | 36.42% | 11.79% |
| 2016 | 10.51% | 24.8% |
| 2015 | -15.41% | -4.67% |
| 2014 | -2.82% | 10.55% |
| 2013 | -3.14% | 36.57% |
| 2012 | 17.32% | 18.78% |
| 2011 | -18.87% | -4.05% |
| 2010 | 15.93% | 24.97% |
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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| VBR | $10,000 | $32,611 | 12.28% |
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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
EEM’s CAGR is 6.81 percentage points lower than that of VBR and as a result, would have yielded $17,033 less on a $10,000 investment. Thus, EEM performed worse than VBR by 6.81% annually.
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