IEFA vs. ARKK: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between IEFA and ARKK? And which fund is better?

The expense ratio of IEFA is 0.68 percentage points lower than ARKK’s (0.07% vs. 0.75%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than ARKK over the past ten years.

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

Summary

IEFA ARKK
Name iShares Core MSCI EAFE ETF ARK Innovation ETF
Category Foreign Large Blend Mid-Cap Growth
Issuer iShares ARK ETF Trust
AUM 95.78B 25.52B
Avg. Return 5.79% 55.45%
Div. Yield 2.28% 0.0%
Expense Ratio 0.07% 0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

IEFA’s dividend yield is 2.28% higher than that of ARKK (2.28% vs. 0.0%). Also, IEFA yielded on average 49.66% less per year over the past decade (5.79% vs. 55.45%). The expense ratio of IEFA is 0.68 percentage points lower than ARKK’s (0.07% vs. 0.75%).

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Fund Composition

Industry Exposure

IEFA vs. ARKK - Industry Exposure

IEFA ARKK
Technology 9.81% 30.5%
Industrials 16.32% 2.11%
Energy 3.19% 0.0%
Communication Services 5.53% 25.01%
Utilities 3.25% 0.0%
Healthcare 12.01% 29.47%
Consumer Defensive 9.78% 0.93%
Real Estate 4.31% 0.51%
Financial Services 15.91% 0.04%
Consumer Cyclical 11.96% 11.42%
Basic Materials 7.93% 0.0%

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 ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

IEFA is 14.21% more exposed to the Industrials sector than ARKK (16.32% vs 2.11%). IEFA’s exposure to Financial Services and Healthcare stocks is 15.87% higher and 17.46% lower respectively (15.91% vs. 0.04% and 12.01% vs. 29.47%). In total, Utilities, Real Estate, and Communication Services also make up 12.43% less of the fund’s holdings compared to ARKK (13.09% vs. 25.52%).

Holdings

IEFA - 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%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

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Performance

Annual Returns

IEFA vs. ARKK - Annual Returns

Year IEFA ARKK
2020 8.55% 152.52%
2019 22.67% 35.73%
2018 -14.2% 3.58%
2017 26.42% 87.38%
2016 1.36% -1.96%
2015 0.53% 3.76%
2014 -4.82% 0.0%
2013 23.73% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

IEFA vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,639 5.79%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in IEFA would have resulted in a final balance of $14,639. This is a profit of $4,639 over 5 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

IEFA’s CAGR is 49.66 percentage points lower than that of ARKK and as a result, would have yielded $50,579 less on a $10,000 investment. Thus, IEFA performed worse than ARKK by 49.66% annually.


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