The iShares MSCI EAFE ETF (EFA) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IAU is a iShares N/A fund. So, what’s the difference between EFA and IAU? And which fund is better?
The expense ratio of EFA is 0.07 percentage points higher than IAU’s (0.32% vs. 0.25%). EFA also has a higher exposure to the financial services sector and a lower standard deviation. Overall, EFA has provided higher returns than IAU over the past ten years.
In this article, we’ll compare EFA vs. IAU. We’ll look at performance and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss EFA’s and IAU’s portfolio growth, risk metrics, and annual returns and examine how these affect their overall returns.
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Summary
| EFA | IAU | |
| Name | iShares MSCI EAFE ETF | iShares Gold Trust |
| Category | Foreign Large Blend | N/A |
| Issuer | iShares | iShares |
| AUM | 56.77B | 28.61B |
| Avg. Return | 6.47% | 6.03% |
| Div. Yield | 2.28% | 0.0% |
| Expense Ratio | 0.32% | 0.25% |
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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.
EFA’s dividend yield is 2.28% higher than that of IAU (2.28% vs. 0.0%). Also, EFA yielded on average 0.44% more per year over the past decade (6.47% vs. 6.03%). The expense ratio of EFA is 0.07 percentage points higher than IAU’s (0.32% vs. 0.25%).
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Fund Composition
Industry Exposure
| EFA | IAU | |
| Technology | 9.68% | 0.0% |
| Industrials | 15.01% | 0.0% |
| Energy | 3.51% | 0.0% |
| Communication Services | 5.68% | 0.0% |
| Utilities | 3.35% | 0.0% |
| Healthcare | 12.8% | 0.0% |
| Consumer Defensive | 10.56% | 0.0% |
| Real Estate | 3.01% | 0.0% |
| Financial Services | 16.88% | 0.0% |
| Consumer Cyclical | 11.62% | 0.0% |
| 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 iShares Gold Trust (IAU) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
IAU’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
EFA is 16.88% more exposed to the Financial Services sector than IAU (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 15.01% higher and 12.80% higher respectively (15.01% vs. 0.0% and 12.8% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 12.54% more of the fund’s holdings compared to IAU (12.54% vs. 0.00%).
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%.
| IAU Holdings | Weight |
| Gold | 100.0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
| N/A | 0% |
IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.
N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.
Risk Analysis
| EFA | IAU | |
| Mean Return | 0.57 | 0.23 |
| R-squared | 96.78 | 16.03 |
| Std. Deviation | 15.01 | 16.97 |
| Alpha | 0.47 | 4.16 |
| Beta | 0.98 | 0.48 |
| Sharpe Ratio | 0.41 | 0.13 |
| Treynor Ratio | 5.33 | 1.5 |
The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a R-squared of 96.78 and a Treynor Ratio of 5.33. Its Standard Deviation is 15.01 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Alpha of 0.47 and a Sharpe Ratio of 0.41.
The iShares Gold Trust (IAU) has a Beta of 0.48 with a Standard Deviation of 16.97 and a Sharpe Ratio of 0.13. Its Mean Return is 0.23 while IAU’s Treynor Ratio is 1.5. Furthermore, the fund has a R-squared of 16.03 and a Alpha of 4.16.
EFA’s Mean Return is 0.34 points higher than that of IAU and its R-squared is 80.75 points higher. With a Standard Deviation of 15.01, EFA is slightly less volatile than IAU. The Alpha and Beta of EFA are 3.69 points lower and 0.50 points higher than IAU’s Alpha and Beta.
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Performance
Annual Returns
| Year | EFA | IAU |
| 2020 | 7.92% | 23.86% |
| 2019 | 21.94% | 18.54% |
| 2018 | -13.83% | -1.39% |
| 2017 | 24.94% | 11.58% |
| 2016 | 0.96% | 8.85% |
| 2015 | -0.9% | -11.65% |
| 2014 | -5.04% | -0.44% |
| 2013 | 22.62% | -27.96% |
| 2012 | 17.22% | 8.37% |
| 2011 | -12.18% | 8.66% |
| 2010 | 7.52% | 27.93% |
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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| IAU | $10,000 | $16,786 | 6.03% |
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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.
EFA’s CAGR is 0.44 percentage points higher than that of IAU and as a result, would have yielded $1,483 more on a $10,000 investment. Thus, EFA outperformed IAU by 0.44% annually.
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