The iShares MSCI EAFE ETF (EFA) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between EFA and IEF? And which fund is better?
The expense ratio of EFA is 0.17 percentage points higher than IEF’s (0.32% vs. 0.15%). EFA also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than IEF over the past ten years.
In this article, we’ll compare EFA vs. IEF. We’ll look at industry exposure and performance, as well as at their holdings and fund composition. Moreover, I’ll also discuss EFA’s and IEF’s portfolio growth, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||Foreign Large Blend||Long Government|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
EFA’s dividend yield is 1.44% higher than that of IEF (2.28% vs. 0.84%). Also, EFA yielded on average 1.41% more per year over the past decade (6.47% vs. 5.06%). The expense ratio of EFA is 0.17 percentage points higher than IEF’s (0.32% vs. 0.15%).
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|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
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%.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a Alpha of 0.47 and a Sharpe Ratio of 0.41. Its Treynor Ratio is 5.33 while EFA’s Standard Deviation is 15.01. Furthermore, the fund has a R-squared of 96.78 and a Mean Return of 0.57.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Standard Deviation of 5.42 with a Sharpe Ratio of 0.6 and a R-squared of 77.56. Its Beta is 1.59 while IEF’s Alpha is -1.2. Furthermore, the fund has a Treynor Ratio of 1.97 and a Mean Return of 0.32.
EFA’s Mean Return is 0.25 points higher than that of IEF and its R-squared is 19.22 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than IEF. The Alpha and Beta of EFA are 1.67 points higher and 0.61 points lower than IEF’s Alpha and Beta.
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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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
EFA’s CAGR is 1.41 percentage points higher than that of IEF and as a result, would have yielded $1,333 more on a $10,000 investment. Thus, EFA outperformed IEF by 1.41% annually.
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