EFA vs. IUSB: What’s The Difference?

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

The expense ratio of EFA is 0.26 percentage points higher than IUSB’s (0.32% vs. 0.06%). EFA also has a high exposure to the financial services sector while IUSB is mostly comprised of AAA bonds. Overall, EFA has provided higher returns than IUSB over the past ten years.

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

Summary

EFA IUSB
Name iShares MSCI EAFE ETF iShares Core Total USD Bond Market ETF
Category Foreign Large Blend N/A
Issuer iShares iShares
AUM 56.77B 14.49B
Avg. Return 6.47% 4.13%
Div. Yield 2.28% 2.1%
Expense Ratio 0.32% 0.06%

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 Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.

EFA’s dividend yield is 0.18% higher than that of IUSB (2.28% vs. 2.1%). Also, EFA yielded on average 2.34% more per year over the past decade (6.47% vs. 4.13%). The expense ratio of EFA is 0.26 percentage points higher than IUSB’s (0.32% vs. 0.06%).

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Fund Composition

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%.

IUSB - Holdings

IUSB Bond Sectors Weight
AAA 58.32%
BBB 16.98%
A 12.27%
BB 4.33%
AA 3.36%
B 2.8%
Others 1.01%
Below B 0.92%
US Government 0.0%

IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.

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Risk Analysis

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

The iShares Core Total USD Bond Market ETF (IUSB) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Alpha is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Beta of 0.

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

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Performance

Annual Returns

EFA vs. IUSB - Annual Returns

Year EFA IUSB
2020 7.92% 7.59%
2019 21.94% 9.26%
2018 -13.83% -0.38%
2017 24.94% 4.06%
2016 0.96% 3.78%
2015 -0.9% 0.46%
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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.

Portfolio Growth

EFA vs. IUSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $14,175 6.47%
IUSB $10,000 $12,704 4.13%

A $10,000 investment in EFA would have resulted in a final balance of $14,175. This is a profit of $4,175 over 6 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.

EFA’s CAGR is 2.34 percentage points higher than that of IUSB and as a result, would have yielded $1,471 more on a $10,000 investment. Thus, EFA outperformed IUSB by 2.34% annually.


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