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IEMG vs. IEF: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and IEF is a iShares Long Government fund. So, what’s the difference between IEMG and IEF? And which fund is better?

The expense ratio of IEMG is 0.04 percentage points lower than IEF’s (0.11% vs. 0.15%). IEMG also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, IEMG has provided higher returns than IEF over the past ten years.

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

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Summary

IEMGIEF
NameiShares Core MSCI Emerging Markets ETFiShares 7-10 Year Treasury Bond ETF
CategoryDiversified Emerging MktsLong Government
IssueriSharesiShares
AUM83.68B13.44B
Avg. Return7.41%5.06%
Div. Yield1.78%0.84%
Expense Ratio0.11%0.15%

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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

IEMG’s dividend yield is 0.94% higher than that of IEF (1.78% vs. 0.84%). Also, IEMG yielded on average 2.35% more per year over the past decade (7.41% vs. 5.06%). The expense ratio of IEMG is 0.04 percentage points lower than IEF’s (0.11% vs. 0.15%).

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Fund Composition

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%.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

IEMGIEF
Mean Return00.32
R-squared077.56
Std. Deviation05.42
Alpha0-1.2
Beta01.59
Sharpe Ratio00.6
Treynor Ratio01.97

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

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Sharpe Ratio of 0.6 with a Standard Deviation of 5.42 and a R-squared of 77.56. Its Alpha is -1.2 while IEF’s Mean Return is 0.32. Furthermore, the fund has a Beta of 1.59 and a Treynor Ratio of 1.97.

IEMG’s Mean Return is 0.32 points lower than that of IEF and its R-squared is 77.56 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than IEF. The Alpha and Beta of IEMG are 1.20 points higher and 1.59 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. IEF - Annual Returns

YearIEMGIEF
202018.18%9.84%
201917.5%8.38%
2018-14.69%0.82%
201736.78%2.47%
20169.98%1.0%
2015-13.86%1.55%
2014-2.04%8.92%
2013-2.16%-6.12%
20120.0%4.06%
20110.0%15.46%
20100.0%9.29%

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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

IEMG vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEMG$10,000$15,0377.41%
IEF$10,000$13,7395.06%

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 IEF, the end total would have been $13,739. This equates to a $3,739 profit over 7 years and a compound annual growth rate (CAGR) of 5.06%.

IEMG’s CAGR is 2.35 percentage points higher than that of IEF and as a result, would have yielded $1,298 more on a $10,000 investment. Thus, IEMG outperformed IEF by 2.35% annually.


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