EFA vs. IWD: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares Russell 1000 Value ETF (IWD) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and IWD is a iShares Large Value fund. So, what’s the difference between EFA and IWD? And which fund is better?

The expense ratio of EFA is 0.13 percentage points higher than IWD’s (0.32% vs. 0.19%). EFA also has a lower exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than IWD over the past ten years.

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

Summary

EFA IWD
Name iShares MSCI EAFE ETF iShares Russell 1000 Value ETF
Category Foreign Large Blend Large Value
Issuer iShares iShares
AUM 56.77B 54.1B
Avg. Return 6.47% 11.40%
Div. Yield 2.28% 1.57%
Expense Ratio 0.32% 0.19%

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 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.

EFA’s dividend yield is 0.71% higher than that of IWD (2.28% vs. 1.57%). Also, EFA yielded on average 4.93% less per year over the past decade (6.47% vs. 11.40%). The expense ratio of EFA is 0.13 percentage points higher than IWD’s (0.32% vs. 0.19%).

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Fund Composition

Industry Exposure

EFA vs. IWD - Industry Exposure

EFA IWD
Technology 9.68% 10.28%
Industrials 15.01% 11.77%
Energy 3.51% 4.76%
Communication Services 5.68% 8.67%
Utilities 3.35% 4.88%
Healthcare 12.8% 17.78%
Consumer Defensive 10.56% 7.76%
Real Estate 3.01% 4.94%
Financial Services 16.88% 20.43%
Consumer Cyclical 11.62% 5.62%
Basic Materials 7.91% 3.1%

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 Value ETF (IWD) has the most exposure to the Financial Services sector at 20.43%. This is followed by Healthcare and Industrials at 17.78% and 11.77% respectively. Energy (4.76%), Utilities (4.88%), and Real Estate (4.94%) only make up 14.58% of the fund’s total assets.

IWD’s mid-section with moderate exposure is comprised of Consumer Cyclical, Consumer Defensive, Communication Services, Technology, and Industrials stocks at 5.62%, 7.76%, 8.67%, 10.28%, and 11.77%.

EFA is 3.55% less exposed to the Financial Services sector than IWD (16.88% vs 20.43%). EFA’s exposure to Industrials and Healthcare stocks is 3.24% higher and 4.98% lower respectively (15.01% vs. 11.77% and 12.8% vs. 17.78%). In total, Utilities, Energy, and Communication Services also make up 5.77% less of the fund’s holdings compared to IWD (12.54% vs. 18.31%).

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%.

IWD - Holdings

IWD Holdings Weight
Berkshire Hathaway Inc Class B 2.58%
JPMorgan Chase & Co 2.25%
Johnson & Johnson 2.24%
UnitedHealth Group Inc 1.78%
Procter & Gamble Co 1.71%
The Walt Disney Co 1.5%
Bank of America Corp 1.43%
Comcast Corp Class A 1.33%
Exxon Mobil Corp 1.2%
Pfizer Inc 1.18%

IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.

The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.

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Risk Analysis

EFA IWD
Mean Return 0.57 1.03
R-squared 96.78 92.38
Std. Deviation 15.01 14.35
Alpha 0.47 -3.23
Beta 0.98 1.02
Sharpe Ratio 0.41 0.81
Treynor Ratio 5.33 11.06

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

The iShares Russell 1000 Value ETF (IWD) has a Standard Deviation of 14.35 with a Treynor Ratio of 11.06 and a Alpha of -3.23. Its Mean Return is 1.03 while IWD’s R-squared is 92.38. Furthermore, the fund has a Beta of 1.02 and a Sharpe Ratio of 0.81.

EFA’s Mean Return is 0.46 points lower than that of IWD and its R-squared is 4.40 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than IWD. The Alpha and Beta of EFA are 3.70 points higher and 0.04 points lower than IWD’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. IWD - Annual Returns

Year EFA IWD
2020 7.92% 2.67%
2019 21.94% 26.34%
2018 -13.83% -8.4%
2017 24.94% 13.47%
2016 0.96% 17.09%
2015 -0.9% -3.95%
2014 -5.04% 13.21%
2013 22.62% 32.18%
2012 17.22% 17.28%
2011 -12.18% 0.21%
2010 7.52% 15.3%

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 IWD, returning 32.18% on an annual basis. The poorest year for IWD in the last ten years was 2018, with a yield of -8.4%. Most years the iShares Russell 1000 Value ETF has given investors modest returns, such as in 2014, 2017, and 2010, when gains were 13.21%, 13.47%, and 15.3% respectively.

Portfolio Growth

EFA vs. IWD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
IWD $10,000 $30,746 11.40%

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 IWD, the end total would have been $30,746. This equates to a $20,746 profit over 11 years and a compound annual growth rate (CAGR) of 11.40%.

EFA’s CAGR is 4.93 percentage points lower than that of IWD and as a result, would have yielded $12,477 less on a $10,000 investment. Thus, EFA performed worse than IWD by 4.93% annually.


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