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EEM vs. VLUE: What’s The Difference?

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

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

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

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Summary

EEMVLUE
NameiShares MSCI Emerging Markets ETFiShares MSCI USA Value Factor ETF
CategoryDiversified Emerging MktsLarge Value
IssueriSharesiShares
AUM30.33B15.95B
Avg. Return5.47%8.91%
Div. Yield1.48%1.89%
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 Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

EEM’s dividend yield is 0.41% lower than that of VLUE (1.48% vs. 1.89%). Also, EEM yielded on average 3.44% less per year over the past decade (5.47% vs. 8.91%). The expense ratio of EEM is 0.53 percentage points higher than VLUE’s (0.68% vs. 0.15%).

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Fund Composition

Industry Exposure

EEM vs. VLUE - Industry Exposure

EEMVLUE
Technology21.36%26.89%
Industrials4.61%9.14%
Energy5.17%2.42%
Communication Services11.76%10.39%
Utilities1.99%2.68%
Healthcare5.06%14.31%
Consumer Defensive5.45%7.22%
Real Estate1.98%3.19%
Financial Services18.39%10.96%
Consumer Cyclical15.16%10.66%
Basic Materials9.07%2.14%

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 Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.

VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.

EEM is 5.53% less exposed to the Technology sector than VLUE (21.36% vs 26.89%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 7.43% higher and 4.50% higher respectively (18.39% vs. 10.96% and 15.16% vs. 10.66%). In total, Utilities, Industrials, and Healthcare also make up 14.47% less of the fund’s holdings compared to VLUE (11.66% vs. 26.13%).

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%.

VLUE - Holdings

VLUE HoldingsWeight
AT&T Inc7.13%
Intel Corp6.14%
General Motors Co3.19%
Micron Technology Inc3.14%
Cisco Systems Inc3.05%
International Business Machines Corp2.76%
Target Corp2.38%
Citigroup Inc2.32%
Ford Motor Co2.23%
Pfizer Inc2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

EEMVLUE
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 Beta of 1.08 and a R-squared of 83.5. Its Standard Deviation is 17.79 while EEM’s Sharpe Ratio is 0.22. Furthermore, the fund has a Alpha of -2.33 and a Treynor Ratio of 2.22.

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

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

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Performance

Annual Returns

EEM vs. VLUE - Annual Returns

YearEEMVLUE
202017.56%-0.32%
201917.67%27.47%
2018-14.98%-11.18%
201736.42%21.97%
201610.51%15.68%
2015-15.41%-3.54%
2014-2.82%12.29%
2013-3.14%0.0%
201217.32%0.0%
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 VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

EEM vs. VLUE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$14,5755.47%
VLUE$10,000$17,2478.91%

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 VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

EEM’s CAGR is 3.44 percentage points lower than that of VLUE and as a result, would have yielded $2,672 less on a $10,000 investment. Thus, EEM performed worse than VLUE by 3.44% annually.


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