The iShares MSCI Emerging Markets ETF (EEM) and the Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and VOE is a Vanguard Mid-Cap Value fund. So, what’s the difference between EEM and VOE? And which fund is better?
The expense ratio of EEM is 0.61 percentage points higher than VOE’s (0.68% vs. 0.07%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than VOE over the past ten years.
In this article, we’ll compare EEM vs. VOE. We’ll look at annual returns and fund composition, as well as at their industry exposure and holdings. Moreover, I’ll also discuss EEM’s and VOE’s performance, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| EEM | VOE | |
| Name | iShares MSCI Emerging Markets ETF | Vanguard Mid-Cap Value Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Mid-Cap Value |
| Issuer | iShares | Vanguard |
| AUM | 30.33B | 26.78B |
| Avg. Return | 5.47% | 12.52% |
| Div. Yield | 1.48% | 1.87% |
| 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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.
EEM’s dividend yield is 0.39% lower than that of VOE (1.48% vs. 1.87%). Also, EEM yielded on average 7.05% less per year over the past decade (5.47% vs. 12.52%). The expense ratio of EEM is 0.61 percentage points higher than VOE’s (0.68% vs. 0.07%).
Fund Composition
Industry Exposure
| EEM | VOE | |
| Technology | 21.36% | 9.85% |
| Industrials | 4.61% | 9.4% |
| Energy | 5.17% | 5.69% |
| Communication Services | 11.76% | 5.27% |
| Utilities | 1.99% | 10.93% |
| Healthcare | 5.06% | 7.04% |
| Consumer Defensive | 5.45% | 4.85% |
| Real Estate | 1.98% | 11.48% |
| Financial Services | 18.39% | 18.26% |
| Consumer Cyclical | 15.16% | 11.8% |
| Basic Materials | 9.07% | 5.44% |
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 Mid-Cap Value Index Fund ETF Shares (VOE) has the most exposure to the Financial Services sector at 18.26%. This is followed by Consumer Cyclical and Real Estate at 11.8% and 11.48% respectively. Communication Services (5.27%), Basic Materials (5.44%), and Energy (5.69%) only make up 16.40% of the fund’s total assets.
VOE’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Technology, Utilities, and Real Estate stocks at 7.04%, 9.4%, 9.85%, 10.93%, and 11.48%.
EEM is 11.51% more exposed to the Technology sector than VOE (21.36% vs 9.85%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 0.13% higher and 3.36% higher respectively (18.39% vs. 18.26% and 15.16% vs. 11.8%). In total, Utilities, Industrials, and Healthcare also make up 15.71% less of the fund’s holdings compared to VOE (11.66% vs. 27.37%).
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%.
| VOE Holdings | Weight |
| Carrier Global Corp Ordinary Shares | 1.28% |
| International Flavors & Fragrances Inc | 1.13% |
| Motorola Solutions Inc | 1.12% |
| Discover Financial Services | 1.09% |
| Welltower Inc | 1.05% |
| Corteva Inc | 0.99% |
| Valero Energy Corp | 0.97% |
| Corning Inc | 0.95% |
| Willis Towers Watson PLC | 0.9% |
| D.R. Horton Inc | 0.89% |
VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.
Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.
Risk Analysis
| EEM | VOE | |
| Mean Return | 0.38 | 1.05 |
| R-squared | 83.5 | 88.76 |
| Std. Deviation | 17.79 | 15.98 |
| Alpha | -2.33 | -3.77 |
| Beta | 1.08 | 1.11 |
| Sharpe Ratio | 0.22 | 0.75 |
| Treynor Ratio | 2.22 | 10.19 |
The iShares MSCI Emerging Markets ETF (EEM) has a R-squared of 83.5 with a Beta of 1.08 and a Treynor Ratio of 2.22. Its Mean Return is 0.38 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Alpha of -2.33 and a Sharpe Ratio of 0.22.
The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a R-squared of 88.76 with a Standard Deviation of 15.98 and a Treynor Ratio of 10.19. Its Beta is 1.11 while VOE’s Sharpe Ratio is 0.75. Furthermore, the fund has a Alpha of -3.77 and a Mean Return of 1.05.
EEM’s Mean Return is 0.67 points lower than that of VOE and its R-squared is 5.26 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than VOE. The Alpha and Beta of EEM are 1.44 points higher and 0.03 points lower than VOE’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | VOE |
| 2020 | 17.56% | 2.5% |
| 2019 | 17.67% | 27.98% |
| 2018 | -14.98% | -12.41% |
| 2017 | 36.42% | 17.05% |
| 2016 | 10.51% | 15.26% |
| 2015 | -15.41% | -1.8% |
| 2014 | -2.82% | 13.98% |
| 2013 | -3.14% | 37.65% |
| 2012 | 17.32% | 16.04% |
| 2011 | -18.87% | -0.32% |
| 2010 | 15.93% | 21.83% |
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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| VOE | $10,000 | $33,655 | 12.52% |
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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.
EEM’s CAGR is 7.05 percentage points lower than that of VOE and as a result, would have yielded $18,077 less on a $10,000 investment. Thus, EEM performed worse than VOE by 7.05% annually.
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