EFA vs. ACWI: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and ACWI is a iShares N/A fund. So, what’s the difference between EFA and ACWI? And which fund is better?

EFA and ACWI have the same expense ratio: 0.32%. EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than ACWI over the past ten years.

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

Summary

EFA ACWI
Name iShares MSCI EAFE ETF iShares MSCI ACWI ETF
Category Foreign Large Blend N/A
Issuer iShares iShares
AUM 56.77B 16.85B
Avg. Return 6.47% 10.21%
Div. Yield 2.28% 1.39%
Expense Ratio 0.32% 0.32%

The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

EFA’s dividend yield is 0.89% higher than that of ACWI (2.28% vs. 1.39%). Also, EFA yielded on average 3.74% less per year over the past decade (6.47% vs. 10.21%). EFA and ACWI have the same expense ratio: 0.32%.

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Fund Composition

Industry Exposure

EFA vs. ACWI - Industry Exposure

EFA ACWI
Technology 9.68% 20.41%
Industrials 15.01% 9.65%
Energy 3.51% 3.48%
Communication Services 5.68% 9.87%
Utilities 3.35% 2.61%
Healthcare 12.8% 11.74%
Consumer Defensive 10.56% 7.15%
Real Estate 3.01% 2.75%
Financial Services 16.88% 15.58%
Consumer Cyclical 11.62% 12.01%
Basic Materials 7.91% 4.73%

The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.

EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.

The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.

ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.

EFA is 1.30% more exposed to the Financial Services sector than ACWI (16.88% vs 15.58%). EFA’s exposure to Industrials and Healthcare stocks is 5.36% higher and 1.06% higher respectively (15.01% vs. 9.65% and 12.8% vs. 11.74%). In total, Utilities, Energy, and Communication Services also make up 3.42% less of the fund’s holdings compared to ACWI (12.54% vs. 15.96%).

Holdings

EFA - Holdings

EFA Holdings Weight
Nestle SA 2.11%
ASML Holding NV 1.69%
Roche Holding AG 1.55%
LVMH Moet Hennessy Louis Vuitton SE 1.28%
Novartis AG 1.19%
Toyota Motor Corp 1.09%
AstraZeneca PLC 0.92%
Unilever PLC 0.9%
AIA Group Ltd 0.88%
SAP SE 0.86%

EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.

Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

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Risk Analysis

EFA ACWI
Mean Return 0.57 0.89
R-squared 96.78 99.96
Std. Deviation 15.01 14.05
Alpha 0.47 0.15
Beta 0.98 1
Sharpe Ratio 0.41 0.71
Treynor Ratio 5.33 9.45

The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a Sharpe Ratio of 0.41 and a R-squared of 96.78. Its Alpha is 0.47 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Treynor Ratio of 5.33 and a Standard Deviation of 15.01.

The iShares MSCI ACWI ETF (ACWI) has a Standard Deviation of 14.05 with a Sharpe Ratio of 0.71 and a Treynor Ratio of 9.45. Its Mean Return is 0.89 while ACWI’s R-squared is 99.96. Furthermore, the fund has a Alpha of 0.15 and a Beta of 1.

EFA’s Mean Return is 0.32 points lower than that of ACWI and its R-squared is 3.18 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than ACWI. The Alpha and Beta of EFA are 0.32 points higher and 0.02 points lower than ACWI’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. ACWI - Annual Returns

Year EFA ACWI
2020 7.92% 16.38%
2019 21.94% 26.7%
2018 -13.83% -9.15%
2017 24.94% 24.35%
2016 0.96% 8.22%
2015 -0.9% -2.39%
2014 -5.04% 4.64%
2013 22.62% 22.91%
2012 17.22% 15.99%
2011 -12.18% -7.6%
2010 7.52% 12.31%

EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

EFA vs. ACWI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
ACWI $10,000 $27,241 10.21%

A $10,000 investment in EFA would have resulted in a final balance of $18,269. This is a profit of $8,269 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.

EFA’s CAGR is 3.74 percentage points lower than that of ACWI and as a result, would have yielded $8,972 less on a $10,000 investment. Thus, EFA performed worse than ACWI by 3.74% annually.


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