The iShares Core MSCI EAFE ETF (IEFA) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and ACWI is a iShares N/A fund. So, what’s the difference between IEFA and ACWI? And which fund is better?
The expense ratio of IEFA is 0.25 percentage points lower than ACWI’s (0.07% vs. 0.32%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than ACWI over the past ten years.
In this article, we’ll compare IEFA vs. ACWI. We’ll look at fund composition and annual returns, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss IEFA’s and ACWI’s holdings, portfolio growth, and performance and examine how these affect their overall returns.
Summary
| IEFA | ACWI | |
| Name | iShares Core MSCI EAFE ETF | iShares MSCI ACWI ETF |
| Category | Foreign Large Blend | N/A |
| Issuer | iShares | iShares |
| AUM | 95.78B | 16.85B |
| Avg. Return | 5.79% | 10.21% |
| Div. Yield | 2.28% | 1.39% |
| Expense Ratio | 0.07% | 0.32% |
The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
IEFA’s dividend yield is 0.89% higher than that of ACWI (2.28% vs. 1.39%). Also, IEFA yielded on average 4.43% less per year over the past decade (5.79% vs. 10.21%). The expense ratio of IEFA is 0.25 percentage points lower than ACWI’s (0.07% vs. 0.32%).
Fund Composition
Industry Exposure
| IEFA | ACWI | |
| Technology | 9.81% | 20.41% |
| Industrials | 16.32% | 9.65% |
| Energy | 3.19% | 3.48% |
| Communication Services | 5.53% | 9.87% |
| Utilities | 3.25% | 2.61% |
| Healthcare | 12.01% | 11.74% |
| Consumer Defensive | 9.78% | 7.15% |
| Real Estate | 4.31% | 2.75% |
| Financial Services | 15.91% | 15.58% |
| Consumer Cyclical | 11.96% | 12.01% |
| Basic Materials | 7.93% | 4.73% |
The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.
IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.
The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.
ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.
IEFA is 6.67% more exposed to the Industrials sector than ACWI (16.32% vs 9.65%). IEFA’s exposure to Financial Services and Healthcare stocks is 0.33% higher and 0.27% higher respectively (15.91% vs. 15.58% and 12.01% vs. 11.74%). In total, Utilities, Real Estate, and Communication Services also make up 2.14% less of the fund’s holdings compared to ACWI (13.09% vs. 15.23%).
Holdings
| IEFA Holdings | Weight |
| Nestle SA | 1.77% |
| ASML Holding NV | 1.43% |
| Roche Holding AG | 1.31% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.08% |
| Novartis AG | 1.0% |
| Toyota Motor Corp | 0.92% |
| AstraZeneca PLC | 0.78% |
| Unilever PLC | 0.76% |
| AIA Group Ltd | 0.74% |
| SAP SE | 0.73% |
IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.
Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.
| ACWI Holdings | Weight |
| Apple Inc | 3.44% |
| Microsoft Corp | 2.91% |
| Amazon.com Inc | 2.21% |
| Facebook Inc A | 1.25% |
| Alphabet Inc Class C | 1.12% |
| Alphabet Inc A | 1.09% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.79% |
| Tesla Inc | 0.78% |
| NVIDIA Corp | 0.74% |
| JPMorgan Chase & Co | 0.71% |
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
Performance
Annual Returns
| Year | IEFA | ACWI |
| 2020 | 8.55% | 16.38% |
| 2019 | 22.67% | 26.7% |
| 2018 | -14.2% | -9.15% |
| 2017 | 26.42% | 24.35% |
| 2016 | 1.36% | 8.22% |
| 2015 | 0.53% | -2.39% |
| 2014 | -4.82% | 4.64% |
| 2013 | 23.73% | 22.91% |
| 2012 | 0.0% | 15.99% |
| 2011 | 0.0% | -7.6% |
| 2010 | 0.0% | 12.31% |
IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% respectively.
The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IEFA | $10,000 | $14,008 | 5.79% |
| ACWI | $10,000 | $18,413 | 10.21% |
A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
With a $10,000 investment in ACWI, the end total would have been $18,413. This equates to a $8,413 profit over 7 years and a compound annual growth rate (CAGR) of 10.21%.
IEFA’s CAGR is 4.43 percentage points lower than that of ACWI and as a result, would have yielded $4,405 less on a $10,000 investment. Thus, IEFA performed worse than ACWI by 4.43% annually.
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