IEFA vs. VGK: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between IEFA and VGK? And which fund is better?

The expense ratio of IEFA is 0.01 percentage points lower than VGK’s (0.07% vs. 0.08%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than VGK over the past ten years.

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

Summary

IEFA VGK
Name iShares Core MSCI EAFE ETF Vanguard FTSE Europe Index Fund ETF Shares
Category Foreign Large Blend Europe Stock
Issuer iShares Vanguard
AUM 95.78B 25.7B
Avg. Return 5.79% 6.68%
Div. Yield 2.28% 2.52%
Expense Ratio 0.07% 0.08%

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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

IEFA’s dividend yield is 0.24% lower than that of VGK (2.28% vs. 2.52%). Also, IEFA yielded on average 0.89% less per year over the past decade (5.79% vs. 6.68%). The expense ratio of IEFA is 0.01 percentage points lower than VGK’s (0.07% vs. 0.08%).

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Fund Composition

Industry Exposure

IEFA vs. VGK - Industry Exposure

IEFA VGK
Technology 9.81% 8.3%
Industrials 16.32% 15.58%
Energy 3.19% 4.3%
Communication Services 5.53% 5.09%
Utilities 3.25% 3.89%
Healthcare 12.01% 13.76%
Consumer Defensive 9.78% 11.39%
Real Estate 4.31% 2.57%
Financial Services 15.91% 15.85%
Consumer Cyclical 11.96% 11.6%
Basic Materials 7.93% 7.67%

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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

IEFA is 0.74% more exposed to the Industrials sector than VGK (16.32% vs 15.58%). IEFA’s exposure to Financial Services and Healthcare stocks is 0.06% higher and 1.75% lower respectively (15.91% vs. 15.85% and 12.01% vs. 13.76%). In total, Utilities, Real Estate, and Communication Services also make up 1.54% more of the fund’s holdings compared to VGK (13.09% vs. 11.55%).

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%.

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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Performance

Annual Returns

IEFA vs. VGK - Annual Returns

Year IEFA VGK
2020 8.55% 6.5%
2019 22.67% 24.26%
2018 -14.2% -14.79%
2017 26.42% 27.06%
2016 1.36% -0.59%
2015 0.53% -1.87%
2014 -4.82% -6.56%
2013 23.73% 24.93%
2012 0.0% 21.01%
2011 0.0% -11.49%
2010 0.0% 5.01%

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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

IEFA vs. VGK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
VGK $10,000 $13,060 6.68%

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 VGK, the end total would have been $13,060. This equates to a $3,060 profit over 7 years and a compound annual growth rate (CAGR) of 6.68%.

IEFA’s CAGR is 0.89 percentage points lower than that of VGK and as a result, would have yielded $948 more on a $10,000 investment. Thus, IEFA performed worse than VGK by 0.89% annually.


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