The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between IEMG and EFA? And which fund is better?
The expense ratio of IEMG is 0.21 percentage points lower than EFA’s (0.11% vs. 0.32%). IEMG also has a higher exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided higher returns than EFA over the past ten years.
In this article, we’ll compare IEMG vs. EFA. We’ll look at industry exposure and portfolio growth, as well as at their holdings and performance. Moreover, I’ll also discuss IEMG’s and EFA’s fund composition, annual returns, and risk metrics and examine how these affect their overall returns.
Summary
| IEMG | EFA | |
| Name | iShares Core MSCI Emerging Markets ETF | iShares MSCI EAFE ETF |
| Category | Diversified Emerging Mkts | Foreign Large Blend |
| Issuer | iShares | iShares |
| AUM | 83.68B | 56.77B |
| Avg. Return | 7.41% | 6.47% |
| Div. Yield | 1.78% | 2.28% |
| Expense Ratio | 0.11% | 0.32% |
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 EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
IEMG’s dividend yield is 0.50% lower than that of EFA (1.78% vs. 2.28%). Also, IEMG yielded on average 0.94% more per year over the past decade (7.41% vs. 6.47%). The expense ratio of IEMG is 0.21 percentage points lower than EFA’s (0.11% vs. 0.32%).
Fund Composition
Industry Exposure
| IEMG | EFA | |
| Technology | 20.44% | 9.68% |
| Industrials | 5.92% | 15.01% |
| Energy | 4.71% | 3.51% |
| Communication Services | 11.41% | 5.68% |
| Utilities | 2.13% | 3.35% |
| Healthcare | 5.73% | 12.8% |
| Consumer Defensive | 5.68% | 10.56% |
| Real Estate | 2.75% | 3.01% |
| Financial Services | 16.9% | 16.88% |
| Consumer Cyclical | 15.67% | 11.62% |
| Basic Materials | 8.64% | 7.91% |
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 EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.
EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.
IEMG is 10.76% more exposed to the Technology sector than EFA (20.44% vs 9.68%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 0.02% higher and 4.05% higher respectively (16.9% vs. 16.88% and 15.67% vs. 11.62%). In total, Real Estate, Energy, and Consumer Defensive also make up 3.94% less of the fund’s holdings compared to EFA (13.14% vs. 17.08%).
Holdings
| IEMG Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 5.37% |
| Tencent Holdings Ltd | 4.42% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.38% |
| Samsung Electronics Co Ltd | 3.49% |
| Meituan | 1.52% |
| Naspers Ltd Class N | 0.93% |
| Vale SA | 0.91% |
| Reliance Industries Ltd Shs Dematerialised | 0.83% |
| China Construction Bank Corp Class H | 0.77% |
| Infosys Ltd | 0.74% |
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%.
| EFA Holdings | Weight |
| Nestle SA | 2.11% |
| ASML Holding NV | 1.69% |
| Roche Holding AG | 1.55% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.28% |
| Novartis AG | 1.19% |
| Toyota Motor Corp | 1.09% |
| AstraZeneca PLC | 0.92% |
| Unilever PLC | 0.9% |
| AIA Group Ltd | 0.88% |
| SAP SE | 0.86% |
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
Risk Analysis
| IEMG | EFA | |
| Mean Return | 0 | 0.57 |
| R-squared | 0 | 96.78 |
| Std. Deviation | 0 | 15.01 |
| Alpha | 0 | 0.47 |
| Beta | 0 | 0.98 |
| Sharpe Ratio | 0 | 0.41 |
| Treynor Ratio | 0 | 5.33 |
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Standard Deviation of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Mean Return is 0 while IEMG’s Beta is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.
The iShares MSCI EAFE ETF (EFA) has a R-squared of 96.78 with a Sharpe Ratio of 0.41 and a Beta of 0.98. Its Alpha is 0.47 while EFA’s Mean Return is 0.57. Furthermore, the fund has a Standard Deviation of 15.01 and a Treynor Ratio of 5.33.
IEMG’s Mean Return is 0.57 points lower than that of EFA and its R-squared is 96.78 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than EFA. The Alpha and Beta of IEMG are 0.47 points lower and 0.98 points lower than EFA’s Alpha and Beta.
Performance
Annual Returns
| Year | IEMG | EFA |
| 2020 | 18.18% | 7.92% |
| 2019 | 17.5% | 21.94% |
| 2018 | -14.69% | -13.83% |
| 2017 | 36.78% | 24.94% |
| 2016 | 9.98% | 0.96% |
| 2015 | -13.86% | -0.9% |
| 2014 | -2.04% | -5.04% |
| 2013 | -2.16% | 22.62% |
| 2012 | 0.0% | 17.22% |
| 2011 | 0.0% | -12.18% |
| 2010 | 0.0% | 7.52% |
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 EFA, returning 24.94% on an annual basis. The poorest year for EFA in the last ten years was 2018, with a yield of -13.83%. Most years the iShares MSCI EAFE ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 0.96%, 7.52%, and 7.92% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IEMG | $10,000 | $15,037 | 7.41% |
| EFA | $10,000 | $13,460 | 6.47% |
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 EFA, the end total would have been $13,460. This equates to a $3,460 profit over 7 years and a compound annual growth rate (CAGR) of 6.47%.
IEMG’s CAGR is 0.94 percentage points higher than that of EFA and as a result, would have yielded $1,577 more on a $10,000 investment. Thus, IEMG outperformed EFA by 0.94% annually.
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