EFA vs. ARKK: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between EFA and ARKK? And which fund is better?

The expense ratio of EFA is 0.43 percentage points lower than ARKK’s (0.32% vs. 0.75%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than ARKK over the past ten years.

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

Summary

EFA ARKK
Name iShares MSCI EAFE ETF ARK Innovation ETF
Category Foreign Large Blend Mid-Cap Growth
Issuer iShares ARK ETF Trust
AUM 56.77B 25.52B
Avg. Return 6.47% 55.45%
Div. Yield 2.28% 0.0%
Expense Ratio 0.32% 0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

EFA’s dividend yield is 2.28% higher than that of ARKK (2.28% vs. 0.0%). Also, EFA yielded on average 48.98% less per year over the past decade (6.47% vs. 55.45%). The expense ratio of EFA is 0.43 percentage points lower than ARKK’s (0.32% vs. 0.75%).

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Fund Composition

Industry Exposure

EFA vs. ARKK - Industry Exposure

EFA ARKK
Technology 9.68% 30.5%
Industrials 15.01% 2.11%
Energy 3.51% 0.0%
Communication Services 5.68% 25.01%
Utilities 3.35% 0.0%
Healthcare 12.8% 29.47%
Consumer Defensive 10.56% 0.93%
Real Estate 3.01% 0.51%
Financial Services 16.88% 0.04%
Consumer Cyclical 11.62% 11.42%
Basic Materials 7.91% 0.0%

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 ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

EFA is 16.84% more exposed to the Financial Services sector than ARKK (16.88% vs 0.04%). EFA’s exposure to Industrials and Healthcare stocks is 12.90% higher and 16.67% lower respectively (15.01% vs. 2.11% and 12.8% vs. 29.47%). In total, Utilities, Energy, and Communication Services also make up 12.47% less of the fund’s holdings compared to ARKK (12.54% vs. 25.01%).

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%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

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Risk Analysis

EFA ARKK
Mean Return 0.57 0
R-squared 96.78 0
Std. Deviation 15.01 0
Alpha 0.47 0
Beta 0.98 0
Sharpe Ratio 0.41 0
Treynor Ratio 5.33 0

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

The ARK Innovation ETF (ARKK) has a Beta of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its R-squared is 0 while ARKK’s Mean Return is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Standard Deviation of 0.

EFA’s Mean Return is 0.57 points higher than that of ARKK and its R-squared is 96.78 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than ARKK. The Alpha and Beta of EFA are 0.47 points higher and 0.98 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. ARKK - Annual Returns

Year EFA ARKK
2020 7.92% 152.52%
2019 21.94% 35.73%
2018 -13.83% 3.58%
2017 24.94% 87.38%
2016 0.96% -1.96%
2015 -0.9% 3.76%
2014 -5.04% 0.0%
2013 22.62% 0.0%
2012 17.22% 0.0%
2011 -12.18% 0.0%
2010 7.52% 0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

EFA vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $14,303 6.47%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in EFA would have resulted in a final balance of $14,303. This is a profit of $4,303 over 5 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

EFA’s CAGR is 48.98 percentage points lower than that of ARKK and as a result, would have yielded $50,915 less on a $10,000 investment. Thus, EFA performed worse than ARKK by 48.98% annually.


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