The iShares Core MSCI EAFE ETF (IEFA) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IEFA and QUAL? And which fund is better?
The expense ratio of IEFA is 0.08 percentage points lower than QUAL’s (0.07% vs. 0.15%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare IEFA vs. QUAL. We’ll look at performance and annual returns, as well as at their fund composition and holdings. Moreover, I’ll also discuss IEFA’s and QUAL’s risk metrics, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core MSCI EAFE ETF||iShares MSCI USA Quality Factor ETF|
|Category||Foreign Large Blend||Large Blend|
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 USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
IEFA’s dividend yield is 0.99% higher than that of QUAL (2.28% vs. 1.29%). Also, IEFA yielded on average 7.63% less per year over the past decade (5.79% vs. 13.42%). The expense ratio of IEFA is 0.08 percentage points lower than QUAL’s (0.07% vs. 0.15%).
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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 USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
IEFA is 7.10% more exposed to the Industrials sector than QUAL (16.32% vs 9.22%). IEFA’s exposure to Financial Services and Healthcare stocks is 0.04% higher and 1.21% lower respectively (15.91% vs. 15.87% and 12.01% vs. 13.22%). In total, Utilities, Real Estate, and Communication Services also make up 3.48% less of the fund’s holdings compared to QUAL (13.09% vs. 16.57%).
|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%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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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 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% 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 QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
IEFA’s CAGR is 7.63 percentage points lower than that of QUAL and as a result, would have yielded $9,243 less on a $10,000 investment. Thus, IEFA performed worse than QUAL by 7.63% annually.
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