The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and VHT is a Vanguard Health fund. So, what’s the difference between EEM and VHT? And which fund is better?
The expense ratio of EEM is 0.58 percentage points higher than VHT’s (0.68% vs. 0.1%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than VHT over the past ten years.
In this article, we’ll compare EEM vs. VHT. We’ll look at fund composition and industry exposure, as well as at their annual returns and performance. Moreover, I’ll also discuss EEM’s and VHT’s holdings, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| EEM | VHT | |
| Name | iShares MSCI Emerging Markets ETF | Vanguard Health Care Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Health |
| Issuer | iShares | Vanguard |
| AUM | 30.33B | 17.94B |
| Avg. Return | 5.47% | 16.04% |
| Div. Yield | 1.48% | 1.15% |
| Expense Ratio | 0.68% | 0.1% |
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
EEM’s dividend yield is 0.33% higher than that of VHT (1.48% vs. 1.15%). Also, EEM yielded on average 10.57% less per year over the past decade (5.47% vs. 16.04%). The expense ratio of EEM is 0.58 percentage points higher than VHT’s (0.68% vs. 0.1%).
Fund Composition
Industry Exposure
| EEM | VHT | |
| Technology | 21.36% | 0.05% |
| Industrials | 4.61% | 0.05% |
| Energy | 5.17% | 0.0% |
| Communication Services | 11.76% | 0.0% |
| Utilities | 1.99% | 0.0% |
| Healthcare | 5.06% | 99.57% |
| Consumer Defensive | 5.45% | 0.0% |
| Real Estate | 1.98% | 0.0% |
| Financial Services | 18.39% | 0.02% |
| Consumer Cyclical | 15.16% | 0.0% |
| Basic Materials | 9.07% | 0.31% |
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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
EEM is 21.31% more exposed to the Technology sector than VHT (21.36% vs 0.05%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.37% higher and 15.16% higher respectively (18.39% vs. 0.02% and 15.16% vs. 0.0%). In total, Utilities, Industrials, and Healthcare also make up 87.96% less of the fund’s holdings compared to VHT (11.66% vs. 99.62%).
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%.
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
Risk Analysis
| EEM | VHT | |
| Mean Return | 0.38 | 1.33 |
| R-squared | 83.5 | 59.86 |
| Std. Deviation | 17.79 | 13.58 |
| Alpha | -2.33 | 7.99 |
| Beta | 1.08 | 0.75 |
| Sharpe Ratio | 0.22 | 1.13 |
| Treynor Ratio | 2.22 | 20.74 |
The iShares MSCI Emerging Markets ETF (EEM) has a R-squared of 83.5 with a Beta of 1.08 and a Alpha of -2.33. Its Treynor Ratio is 2.22 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Sharpe Ratio of 0.22 and a Mean Return of 0.38.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a Standard Deviation of 13.58 and a R-squared of 59.86. Its Alpha is 7.99 while VHT’s Beta is 0.75. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Treynor Ratio of 20.74.
EEM’s Mean Return is 0.95 points lower than that of VHT and its R-squared is 23.64 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than VHT. The Alpha and Beta of EEM are 10.32 points lower and 0.33 points higher than VHT’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | VHT |
| 2020 | 17.56% | 18.21% |
| 2019 | 17.67% | 21.97% |
| 2018 | -14.98% | 5.55% |
| 2017 | 36.42% | 23.34% |
| 2016 | 10.51% | -3.33% |
| 2015 | -15.41% | 7.22% |
| 2014 | -2.82% | 25.38% |
| 2013 | -3.14% | 42.67% |
| 2012 | 17.32% | 19.1% |
| 2011 | -18.87% | 10.57% |
| 2010 | 15.93% | 5.75% |
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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| VHT | $10,000 | $48,464 | 16.04% |
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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.
EEM’s CAGR is 10.57 percentage points lower than that of VHT and as a result, would have yielded $32,886 less on a $10,000 investment. Thus, EEM performed worse than VHT by 10.57% annually.
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