IEFA vs. USMV: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and USMV is a iShares Large Blend fund. So, what’s the difference between IEFA and USMV? And which fund is better?

The expense ratio of IEFA is 0.08 percentage points lower than USMV’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 USMV over the past ten years.

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

Summary

IEFA USMV
Name iShares Core MSCI EAFE ETF iShares MSCI USA Min Vol Factor ETF
Category Foreign Large Blend Large Blend
Issuer iShares iShares
AUM 95.78B 27.6B
Avg. Return 5.79% 13.89%
Div. Yield 2.28% 1.5%
Expense Ratio 0.07% 0.15%

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 Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

IEFA’s dividend yield is 0.78% higher than that of USMV (2.28% vs. 1.5%). Also, IEFA yielded on average 8.11% less per year over the past decade (5.79% vs. 13.89%). The expense ratio of IEFA is 0.08 percentage points lower than USMV’s (0.07% vs. 0.15%).

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Fund Composition

Industry Exposure

IEFA vs. USMV - Industry Exposure

IEFA USMV
Technology 9.81% 20.53%
Industrials 16.32% 10.51%
Energy 3.19% 0.21%
Communication Services 5.53% 11.03%
Utilities 3.25% 6.93%
Healthcare 12.01% 18.42%
Consumer Defensive 9.78% 12.82%
Real Estate 4.31% 2.73%
Financial Services 15.91% 9.65%
Consumer Cyclical 11.96% 5.53%
Basic Materials 7.93% 1.65%

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 Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

IEFA is 5.81% more exposed to the Industrials sector than USMV (16.32% vs 10.51%). IEFA’s exposure to Financial Services and Healthcare stocks is 6.26% higher and 6.41% lower respectively (15.91% vs. 9.65% and 12.01% vs. 18.42%). In total, Utilities, Real Estate, and Communication Services also make up 7.60% less of the fund’s holdings compared to USMV (13.09% vs. 20.69%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Performance

Annual Returns

IEFA vs. USMV - Annual Returns

Year IEFA USMV
2020 8.55% 5.6%
2019 22.67% 27.77%
2018 -14.2% 1.36%
2017 26.42% 18.97%
2016 1.36% 10.5%
2015 0.53% 5.5%
2014 -4.82% 16.34%
2013 23.73% 25.11%
2012 0.0% 11.04%
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

IEFA vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
USMV $10,000 $22,066 13.89%

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 USMV, the end total would have been $22,066. This equates to a $12,066 profit over 7 years and a compound annual growth rate (CAGR) of 13.89%.

IEFA’s CAGR is 8.11 percentage points lower than that of USMV and as a result, would have yielded $8,058 less on a $10,000 investment. Thus, IEFA performed worse than USMV by 8.11% annually.


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