The iShares Core MSCI EAFE ETF (IEFA) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between IEFA and EMB? And which fund is better?
The expense ratio of IEFA is 0.32 percentage points lower than EMB’s (0.07% vs. 0.39%). IEFA also has a high exposure to the industrials sector while EMB is mostly comprised of BBB bonds. Overall, IEFA has provided lower returns than EMB over the past ten years.
In this article, we’ll compare IEFA vs. EMB. We’ll look at portfolio growth and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss IEFA’s and EMB’s performance, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Foreign Large Blend||Emerging Markets Bond|
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 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%.
IEFA’s dividend yield is 1.57% lower than that of EMB (2.28% vs. 3.85%). Also, IEFA yielded on average 0.65% less per year over the past decade (5.79% vs. 6.43%). The expense ratio of IEFA is 0.32 percentage points lower than EMB’s (0.07% vs. 0.39%).
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|ASML Holding NV||1.43%|
|Roche Holding AG||1.31%|
|LVMH Moet Hennessy Louis Vuitton SE||1.08%|
|Toyota Motor Corp||0.92%|
|AIA Group Ltd||0.74%|
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%.
|EMB Bond Sectors||Weight|
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.
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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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 EMB, the end total would have been $14,825. This equates to a $4,825 profit over 7 years and a compound annual growth rate (CAGR) of 6.43%.
IEFA’s CAGR is 0.65 percentage points lower than that of EMB and as a result, would have yielded $817 less on a $10,000 investment. Thus, IEFA performed worse than EMB by 0.65% annually.
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