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IEMG vs. EEM: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between IEMG and EEM? And which fund is better?

The expense ratio of IEMG is 0.57 percentage points lower than EEM’s (0.11% vs. 0.68%). IEMG also has a lower exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided higher returns than EEM over the past ten years.

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

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Summary

IEMGEEM
NameiShares Core MSCI Emerging Markets ETFiShares MSCI Emerging Markets ETF
CategoryDiversified Emerging MktsDiversified Emerging Mkts
IssueriSharesiShares
AUM83.68B30.33B
Avg. Return7.41%5.47%
Div. Yield1.78%1.48%
Expense Ratio0.11%0.68%

The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

IEMG’s dividend yield is 0.30% higher than that of EEM (1.78% vs. 1.48%). Also, IEMG yielded on average 1.94% more per year over the past decade (7.41% vs. 5.47%). The expense ratio of IEMG is 0.57 percentage points lower than EEM’s (0.11% vs. 0.68%).

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Fund Composition

Industry Exposure

IEMG vs. EEM - Industry Exposure

IEMGEEM
Technology20.44%21.36%
Industrials5.92%4.61%
Energy4.71%5.17%
Communication Services11.41%11.76%
Utilities2.13%1.99%
Healthcare5.73%5.06%
Consumer Defensive5.68%5.45%
Real Estate2.75%1.98%
Financial Services16.9%18.39%
Consumer Cyclical15.67%15.16%
Basic Materials8.64%9.07%

The iShares Core MSCI Emerging Markets ETF (IEMG) has the most exposure to the Technology sector at 20.44%. This is followed by Financial Services and Consumer Cyclical at 16.9% and 15.67% respectively. Real Estate (2.75%), Energy (4.71%), and Consumer Defensive (5.68%) only make up 13.14% of the fund’s total assets.

IEMG’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.73%, 5.92%, 8.64%, 11.41%, and 15.67%.

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

IEMG is 0.92% less exposed to the Technology sector than EEM (20.44% vs 21.36%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 1.49% lower and 0.51% higher respectively (16.9% vs. 18.39% and 15.67% vs. 15.16%). In total, Real Estate, Energy, and Consumer Defensive also make up 0.54% more of the fund’s holdings compared to EEM (13.14% vs. 12.60%).

Holdings

IEMG - Holdings

IEMG HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd5.37%
Tencent Holdings Ltd4.42%
Alibaba Group Holding Ltd Ordinary Shares4.38%
Samsung Electronics Co Ltd3.49%
Meituan1.52%
Naspers Ltd Class N0.93%
Vale SA0.91%
Reliance Industries Ltd Shs Dematerialised0.83%
China Construction Bank Corp Class H0.77%
Infosys Ltd0.74%

IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.

Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

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Risk Analysis

IEMGEEM
Mean Return00.38
R-squared083.5
Std. Deviation017.79
Alpha0-2.33
Beta01.08
Sharpe Ratio00.22
Treynor Ratio02.22

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Beta of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its R-squared is 0 while IEMG’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Alpha of 0.

The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Sharpe Ratio of 0.22 and a Alpha of -2.33. Its R-squared is 83.5 while EEM’s Beta is 1.08. Furthermore, the fund has a Standard Deviation of 17.79 and a Mean Return of 0.38.

IEMG’s Mean Return is 0.38 points lower than that of EEM and its R-squared is 83.50 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than EEM. The Alpha and Beta of IEMG are 2.33 points higher and 1.08 points lower than EEM’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. EEM - Annual Returns

YearIEMGEEM
202018.18%17.56%
201917.5%17.67%
2018-14.69%-14.98%
201736.78%36.42%
20169.98%10.51%
2015-13.86%-15.41%
2014-2.04%-2.82%
2013-2.16%-3.14%
20120.0%17.32%
20110.0%-18.87%
20100.0%15.93%

IEMG had its best year in 2017 with an annual return of 36.78%. IEMG’s worst year over the past decade yielded -14.69% and occurred in 2018. In most years the iShares Core MSCI Emerging Markets ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% respectively.

The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.

Portfolio Growth

IEMG vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEMG$10,000$15,0377.41%
EEM$10,000$14,5755.47%

A $10,000 investment in IEMG would have resulted in a final balance of $15,037. This is a profit of $5,037 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.41%.

With a $10,000 investment in EEM, the end total would have been $14,575. This equates to a $4,575 profit over 7 years and a compound annual growth rate (CAGR) of 5.47%.

IEMG’s CAGR is 1.94 percentage points higher than that of EEM and as a result, would have yielded $462 more on a $10,000 investment. Thus, IEMG outperformed EEM by 1.94% annually.


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