The iShares MSCI EAFE ETF (EFA) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IWB is a iShares Large Blend fund. So, what’s the difference between EFA and IWB? And which fund is better?
The expense ratio of EFA is 0.17 percentage points higher than IWB’s (0.32% vs. 0.15%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than IWB over the past ten years.
In this article, we’ll compare EFA vs. IWB. We’ll look at risk metrics and industry exposure, as well as at their performance and holdings. Moreover, I’ll also discuss EFA’s and IWB’s fund composition, portfolio growth, and annual returns and examine how these affect their overall returns.
Summary
| EFA | IWB | |
| Name | iShares MSCI EAFE ETF | iShares Russell 1000 ETF |
| Category | Foreign Large Blend | Large Blend |
| Issuer | iShares | iShares |
| AUM | 56.77B | 30.54B |
| Avg. Return | 6.47% | 14.64% |
| Div. Yield | 2.28% | 1.14% |
| Expense Ratio | 0.32% | 0.15% |
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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.
EFA’s dividend yield is 1.14% higher than that of IWB (2.28% vs. 1.14%). Also, EFA yielded on average 8.17% less per year over the past decade (6.47% vs. 14.64%). The expense ratio of EFA is 0.17 percentage points higher than IWB’s (0.32% vs. 0.15%).
Fund Composition
Industry Exposure
| EFA | IWB | |
| Technology | 9.68% | 25.33% |
| Industrials | 15.01% | 8.88% |
| Energy | 3.51% | 2.44% |
| Communication Services | 5.68% | 10.83% |
| Utilities | 3.35% | 2.36% |
| Healthcare | 12.8% | 13.35% |
| Consumer Defensive | 10.56% | 5.97% |
| Real Estate | 3.01% | 3.34% |
| Financial Services | 16.88% | 13.64% |
| Consumer Cyclical | 11.62% | 11.85% |
| Basic Materials | 7.91% | 2.02% |
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 Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.
IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.
EFA is 3.24% more exposed to the Financial Services sector than IWB (16.88% vs 13.64%). EFA’s exposure to Industrials and Healthcare stocks is 6.13% higher and 0.55% lower respectively (15.01% vs. 8.88% and 12.8% vs. 13.35%). In total, Utilities, Energy, and Communication Services also make up 3.09% less of the fund’s holdings compared to IWB (12.54% vs. 15.63%).
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%.
| IWB Holdings | Weight |
| Apple Inc | 5.45% |
| Microsoft Corp | 5.11% |
| Amazon.com Inc | 3.43% |
| Facebook Inc Class A | 2.03% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.82% |
| Tesla Inc | 1.27% |
| Berkshire Hathaway Inc Class B | 1.24% |
| NVIDIA Corp | 1.11% |
| JPMorgan Chase & Co | 1.09% |
IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.
Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.
Risk Analysis
| EFA | IWB | |
| Mean Return | 0.57 | 1.27 |
| R-squared | 96.78 | 99.73 |
| Std. Deviation | 15.01 | 13.87 |
| Alpha | 0.47 | -0.38 |
| Beta | 0.98 | 1.02 |
| Sharpe Ratio | 0.41 | 1.05 |
| Treynor Ratio | 5.33 | 14.31 |
The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a Treynor Ratio of 5.33 and a Alpha of 0.47. Its Mean Return is 0.57 while EFA’s R-squared is 96.78. Furthermore, the fund has a Beta of 0.98 and a Sharpe Ratio of 0.41.
The iShares Russell 1000 ETF (IWB) has a Alpha of -0.38 with a Sharpe Ratio of 1.05 and a R-squared of 99.73. Its Beta is 1.02 while IWB’s Standard Deviation is 13.87. Furthermore, the fund has a Mean Return of 1.27 and a Treynor Ratio of 14.31.
EFA’s Mean Return is 0.70 points lower than that of IWB and its R-squared is 2.95 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than IWB. The Alpha and Beta of EFA are 0.85 points higher and 0.04 points lower than IWB’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | IWB |
| 2020 | 7.92% | 20.8% |
| 2019 | 21.94% | 31.26% |
| 2018 | -13.83% | -4.91% |
| 2017 | 24.94% | 21.53% |
| 2016 | 0.96% | 11.91% |
| 2015 | -0.9% | 0.82% |
| 2014 | -5.04% | 13.08% |
| 2013 | 22.62% | 32.93% |
| 2012 | 17.22% | 16.27% |
| 2011 | -12.18% | 1.36% |
| 2010 | 7.52% | 15.94% |
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 2013 was the strongest year for IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| IWB | $10,000 | $42,462 | 14.64% |
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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.
EFA’s CAGR is 8.17 percentage points lower than that of IWB and as a result, would have yielded $24,193 less on a $10,000 investment. Thus, EFA performed worse than IWB by 8.17% annually.
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