The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between IEMG and LQD? And which fund is better?
The expense ratio of IEMG is 0.03 percentage points lower than LQD’s (0.11% vs. 0.14%). IEMG also has a high exposure to the technology sector while LQD is mostly comprised of BBB bonds. Overall, IEMG has provided higher returns than LQD over the past ten years.
In this article, we’ll compare IEMG vs. LQD. We’ll look at industry exposure and risk metrics, as well as at their performance and holdings. Moreover, I’ll also discuss IEMG’s and LQD’s annual returns, portfolio growth, and fund composition and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||iShares iBoxx $ Investment Grade Corporate Bond ETF|
|Category||Diversified Emerging Mkts||Corporate Bond|
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 iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.
IEMG’s dividend yield is 0.70% lower than that of LQD (1.78% vs. 2.48%). Also, IEMG yielded on average 0.83% more per year over the past decade (7.41% vs. 6.58%). The expense ratio of IEMG is 0.03 percentage points lower than LQD’s (0.11% vs. 0.14%).
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|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%|
|Naspers Ltd Class N||0.93%|
|Reliance Industries Ltd Shs Dematerialised||0.83%|
|China Construction Bank Corp Class H||0.77%|
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%.
|LQD Bond Sectors||Weight|
LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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The iShares Core MSCI Emerging Markets ETF (IEMG) has a R-squared of 0 with a Standard Deviation of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while IEMG’s Beta is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Treynor Ratio of 3.08 with a Mean Return of 0.47 and a Sharpe Ratio of 0.85. Its Standard Deviation is 5.94 while LQD’s R-squared is 66.93. Furthermore, the fund has a Alpha of 0.52 and a Beta of 1.62.
IEMG’s Mean Return is 0.47 points lower than that of LQD and its R-squared is 66.93 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than LQD. The Alpha and Beta of IEMG are 0.52 points lower and 1.62 points lower than LQD’s Alpha and Beta.
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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 2019 was the strongest year for LQD, returning 17.13% on an annual basis. The poorest year for LQD in the last ten years was 2018, with a yield of -3.76%. Most years the iShares iBoxx $ Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 7.16%, 8.57%, and 8.89% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 LQD, the end total would have been $15,279. This equates to a $5,279 profit over 7 years and a compound annual growth rate (CAGR) of 6.58%.
IEMG’s CAGR is 0.83 percentage points higher than that of LQD and as a result, would have yielded $242 less on a $10,000 investment. Thus, IEMG outperformed LQD by 0.83% annually.
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