The iShares MSCI EAFE ETF (EFA) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between EFA and MUB? And which fund is better?
The expense ratio of EFA is 0.25 percentage points higher than MUB’s (0.32% vs. 0.07%). EFA also has a high exposure to the financial services sector while MUB is mostly comprised of AA bonds. Overall, EFA has provided higher returns than MUB over the past ten years.
In this article, we’ll compare EFA vs. MUB. We’ll look at fund composition and portfolio growth, as well as at their industry exposure and performance. Moreover, I’ll also discuss EFA’s and MUB’s annual returns, holdings, and risk metrics and examine how these affect their overall returns.
Summary
| EFA | MUB | |
| NameiShares MSCI EAFE ETFiShares National Muni Bond ETF | ||
| Category | Foreign Large Blend | Muni National Interm |
| Issuer | iShares | iShares |
| AUM | 56.77B | 22.71B |
| Avg. Return | 6.47% | 4.04% |
| Div. Yield | 2.28% | 1.96% |
| Expense Ratio | 0.32% | 0.07% |
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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.
EFA’s dividend yield is 0.32% higher than that of MUB (2.28% vs. 1.96%). Also, EFA yielded on average 2.43% more per year over the past decade (6.47% vs. 4.04%). The expense ratio of EFA is 0.25 percentage points higher than MUB’s (0.32% vs. 0.07%).
Fund Composition
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%.
| MUB Bond Sectors | Weight |
| AA | 60.38% |
| AAA | 18.39% |
| A | 15.04% |
| BBB | 6.0% |
| Others | 0.17% |
| BB | 0.02% |
| Below B | 0.0% |
| B | 0.0% |
| US Government | 0.0% |
MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.
Risk Analysis
| EFA | MUB | |
| Mean Return | 0.57 | 0.32 |
| R-squared | 96.78 | 99 |
| Std. Deviation | 15.01 | 3.68 |
| Alpha | 0.47 | -0.46 |
| Beta | 0.98 | 1.01 |
| Sharpe Ratio | 0.41 | 0.88 |
| Treynor Ratio | 5.33 | 3.2 |
The iShares MSCI EAFE ETF (EFA) has a Standard Deviation of 15.01 with a Beta of 0.98 and a Mean Return of 0.57. Its Treynor Ratio is 5.33 while EFA’s Alpha is 0.47. Furthermore, the fund has a Sharpe Ratio of 0.41 and a R-squared of 96.78.
The iShares National Muni Bond ETF (MUB) has a R-squared of 99 with a Mean Return of 0.32 and a Alpha of -0.46. Its Beta is 1.01 while MUB’s Standard Deviation is 3.68. Furthermore, the fund has a Sharpe Ratio of 0.88 and a Treynor Ratio of 3.2.
EFA’s Mean Return is 0.25 points higher than that of MUB and its R-squared is 2.22 points lower. With a Standard Deviation of 15.01, EFA is slightly more volatile than MUB. The Alpha and Beta of EFA are 0.93 points higher and 0.03 points lower than MUB’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | MUB |
| 2020 | 7.92% | 4.87% |
| 2019 | 21.94% | 7.28% |
| 2018 | -13.83% | 0.86% |
| 2017 | 24.94% | 4.61% |
| 2016 | 0.96% | 0.06% |
| 2015 | -0.9% | 2.99% |
| 2014 | -5.04% | 8.61% |
| 2013 | 22.62% | -3.26% |
| 2012 | 17.22% | 6.14% |
| 2011 | -12.18% | 10.85% |
| 2010 | 7.52% | 1.4% |
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 MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $18,269 | 6.47% |
| MUB | $10,000 | $15,333 | 4.04% |
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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.
EFA’s CAGR is 2.43 percentage points higher than that of MUB and as a result, would have yielded $2,936 more on a $10,000 investment. Thus, EFA outperformed MUB by 2.43% annually.
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