The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between EMB and TLT? And which fund is better?
The expense ratio of EMB is 0.24 percentage points higher than TLT’s (0.39% vs. 0.15%). EMB is mostly comprised of BBB bonds and TLT has a high exposure to AAA bond. Overall, EMB has provided lower returns than TLT over the past 11 years.
In this article, we’ll compare EMB vs. TLT. We’ll look at annual returns and industry exposure, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss EMB’s and TLT’s performance, risk metrics, and holdings and examine how these affect their overall returns.
Summary
| EMB | TLT | |
| Name | iShares J.P. Morgan USD Emerging Markets Bond ETF | iShares 20+ Year Treasury Bond ETF |
| Category | Emerging Markets Bond | Long Government |
| Issuer | iShares | iShares |
| AUM | 19.76B | 15.15B |
| Avg. Return | 6.43% | 9.00% |
| Div. Yield | 3.85% | 1.5% |
| Expense Ratio | 0.39% | 0.15% |
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
The iShares 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
EMB’s dividend yield is 2.35% higher than that of TLT (3.85% vs. 1.5%). Also, EMB yielded on average 2.56% less per year over the past decade (6.43% vs. 9.00%). The expense ratio of EMB is 0.24 percentage points higher than TLT’s (0.39% vs. 0.15%).
Fund Composition
Holdings
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
| TLT Bond Sectors | Weight |
| AAA | 100.0% |
| Others | 0.0% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
Risk Analysis
| EMB | TLT | |
| Mean Return | 0.44 | 0.63 |
| R-squared | 23.34 | 68.76 |
| Std. Deviation | 8.44 | 12.76 |
| Alpha | 0.89 | -2.83 |
| Beta | 1.36 | 3.54 |
| Sharpe Ratio | 0.55 | 0.55 |
| Treynor Ratio | 3.24 | 1.82 |
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Beta of 1.36 and a Alpha of 0.89. Its R-squared is 23.34 while EMB’s Standard Deviation is 8.44. Furthermore, the fund has a Treynor Ratio of 3.24 and a Mean Return of 0.44.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Mean Return of 0.63 and a Beta of 3.54. Its R-squared is 68.76 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a Sharpe Ratio of 0.55 and a Alpha of -2.83.
EMB’s Mean Return is 0.19 points lower than that of TLT and its R-squared is 45.42 points lower. With a Standard Deviation of 8.44, EMB is slightly less volatile than TLT. The Alpha and Beta of EMB are 3.72 points higher and 2.18 points lower than TLT’s Alpha and Beta.
Performance
Annual Returns
| Year | EMB | TLT |
| 2020 | 5.48% | 17.92% |
| 2019 | 15.57% | 14.93% |
| 2018 | -5.67% | -2.07% |
| 2017 | 9.98% | 8.92% |
| 2016 | 9.41% | 1.36% |
| 2015 | 0.43% | -1.65% |
| 2014 | 6.69% | 27.35% |
| 2013 | -7.42% | -13.91% |
| 2012 | 17.64% | 3.25% |
| 2011 | 7.2% | 33.6% |
| 2010 | 11.47% | 9.25% |
EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% respectively.
The year 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EMB | $10,000 | $19,295 | 6.43% |
| TLT | $10,000 | $23,809 | 9.00% |
A $10,000 investment in EMB would have resulted in a final balance of $19,295. This is a profit of $9,295 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.43%.
With a $10,000 investment in TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
EMB’s CAGR is 2.56 percentage points lower than that of TLT and as a result, would have yielded $4,514 less on a $10,000 investment. Thus, EMB performed worse than TLT by 2.56% annually.
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