The iShares MSCI EAFE ETF (EFA) and the iShares S&P 500 Growth ETF (IVW) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IVW is a iShares Large Growth fund. So, what’s the difference between EFA and IVW? And which fund is better?
The expense ratio of EFA is 0.14 percentage points higher than IVW’s (0.32% vs. 0.18%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than IVW over the past ten years.
In this article, we’ll compare EFA vs. IVW. We’ll look at risk metrics and fund composition, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss EFA’s and IVW’s performance, holdings, and portfolio growth and examine how these affect their overall returns.
Summary
| EFA | IVW | |
| Name | iShares MSCI EAFE ETF | iShares S&P 500 Growth ETF |
| Category | Foreign Large Blend | Large Growth |
| Issuer | iShares | iShares |
| AUM | 56.77B | 35.72B |
| Avg. Return | 6.47% | 16.74% |
| Div. Yield | 2.28% | 0.61% |
| Expense Ratio | 0.32% | 0.18% |
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 S&P 500 Growth ETF (IVW) is a Large Growth fund that is issued by iShares. It currently has 35.72B total assets under management and has yielded an average annual return of 16.74% over the past 10 years. The fund has a dividend yield of 0.61% with an expense ratio of 0.18%.
EFA’s dividend yield is 1.67% higher than that of IVW (2.28% vs. 0.61%). Also, EFA yielded on average 10.27% less per year over the past decade (6.47% vs. 16.74%). The expense ratio of EFA is 0.14 percentage points higher than IVW’s (0.32% vs. 0.18%).
Fund Composition
Industry Exposure
| EFA | IVW | |
| Technology | 9.68% | 37.8% |
| Industrials | 15.01% | 5.72% |
| Energy | 3.51% | 0.06% |
| Communication Services | 5.68% | 15.44% |
| Utilities | 3.35% | 0.47% |
| Healthcare | 12.8% | 11.88% |
| Consumer Defensive | 10.56% | 3.84% |
| Real Estate | 3.01% | 1.11% |
| Financial Services | 16.88% | 6.78% |
| Consumer Cyclical | 11.62% | 15.25% |
| Basic Materials | 7.91% | 1.65% |
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 S&P 500 Growth ETF (IVW) has the most exposure to the Technology sector at 37.8%. This is followed by Communication Services and Consumer Cyclical at 15.44% and 15.25% respectively. Utilities (0.47%), Real Estate (1.11%), and Basic Materials (1.65%) only make up 3.23% of the fund’s total assets.
IVW’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 3.84%, 5.72%, 6.78%, 11.88%, and 15.25%.
EFA is 10.10% more exposed to the Financial Services sector than IVW (16.88% vs 6.78%). EFA’s exposure to Industrials and Healthcare stocks is 9.29% higher and 0.92% higher respectively (15.01% vs. 5.72% and 12.8% vs. 11.88%). In total, Utilities, Energy, and Communication Services also make up 3.43% less of the fund’s holdings compared to IVW (12.54% vs. 15.97%).
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%.
| IVW Holdings | Weight |
| Apple Inc | 11.46% |
| Microsoft Corp | 10.75% |
| Amazon.com Inc | 7.14% |
| Facebook Inc Class A | 4.28% |
| Alphabet Inc Class A | 4.06% |
| Alphabet Inc Class C | 3.86% |
| Tesla Inc | 2.65% |
| NVIDIA Corp | 2.43% |
| PayPal Holdings Inc | 1.62% |
| Adobe Inc | 1.49% |
IVW’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 11.46%, 10.75%, 7.14%, 4.28%, and 4.06%.
Alphabet Inc Class C (3.86%), Tesla Inc (2.65%), and NVIDIA Corp (2.43%) have a slightly smaller but still significant weight. PayPal Holdings Inc and Adobe Inc are also represented in the IVW’s holdings at 1.62% and 1.49%.
Risk Analysis
| EFA | IVW | |
| Mean Return | 0.57 | 1.44 |
| R-squared | 96.78 | 93.82 |
| Std. Deviation | 15.01 | 13.77 |
| Alpha | 0.47 | 2.19 |
| Beta | 0.98 | 0.98 |
| Sharpe Ratio | 0.41 | 1.21 |
| Treynor Ratio | 5.33 | 17.24 |
The iShares MSCI EAFE ETF (EFA) has a Mean Return of 0.57 with a Beta of 0.98 and a Sharpe Ratio of 0.41. Its Standard Deviation is 15.01 while EFA’s R-squared is 96.78. Furthermore, the fund has a Alpha of 0.47 and a Treynor Ratio of 5.33.
The iShares S&P 500 Growth ETF (IVW) has a R-squared of 93.82 with a Beta of 0.98 and a Alpha of 2.19. Its Sharpe Ratio is 1.21 while IVW’s Mean Return is 1.44. Furthermore, the fund has a Standard Deviation of 13.77 and a Treynor Ratio of 17.24.
EFA’s Mean Return is 0.87 points lower than that of IVW and its R-squared is 2.96 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than IVW. The Alpha and Beta of EFA are 1.72 points lower and 0.00 points lower than IVW’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | IVW |
| 2020 | 7.92% | 33.21% |
| 2019 | 21.94% | 30.91% |
| 2018 | -13.83% | -0.17% |
| 2017 | 24.94% | 27.2% |
| 2016 | 0.96% | 6.74% |
| 2015 | -0.9% | 5.33% |
| 2014 | -5.04% | 14.67% |
| 2013 | 22.62% | 32.48% |
| 2012 | 17.22% | 14.39% |
| 2011 | -12.18% | 4.49% |
| 2010 | 7.52% | 14.84% |
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 IVW, returning 33.21% on an annual basis. The poorest year for IVW in the last ten years was 2018, with a yield of -0.17%. Most years the iShares S&P 500 Growth ETF has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 14.39%, 14.67%, and 14.84% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| IVW | $10,000 | $51,915 | 16.74% |
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 IVW, the end total would have been $51,915. This equates to a $41,915 profit over 11 years and a compound annual growth rate (CAGR) of 16.74%.
EFA’s CAGR is 10.27 percentage points lower than that of IVW and as a result, would have yielded $33,646 less on a $10,000 investment. Thus, EFA performed worse than IVW by 10.27% annually.
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