The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IEMG and QUAL? And which fund is better?
The expense ratio of IEMG is 0.04 percentage points lower than QUAL’s (0.11% vs. 0.15%). IEMG also has a lower exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare IEMG vs. QUAL. We’ll look at performance and portfolio growth, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss IEMG’s and QUAL’s industry exposure, holdings, and annual returns and examine how these affect their overall returns.
Summary
| IEMG | QUAL | |
| Name | iShares Core MSCI Emerging Markets ETF | iShares MSCI USA Quality Factor ETF |
| Category | Diversified Emerging Mkts | Large Blend |
| Issuer | iShares | iShares |
| AUM | 83.68B | 23.93B |
| Avg. Return | 7.41% | 13.42% |
| Div. Yield | 1.78% | 1.29% |
| Expense Ratio | 0.11% | 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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
IEMG’s dividend yield is 0.49% higher than that of QUAL (1.78% vs. 1.29%). Also, IEMG yielded on average 6.01% less per year over the past decade (7.41% vs. 13.42%). The expense ratio of IEMG is 0.04 percentage points lower than QUAL’s (0.11% vs. 0.15%).
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Fund Composition
Industry Exposure
| IEMG | QUAL | |
| Technology | 20.44% | 22.52% |
| Industrials | 5.92% | 9.22% |
| Energy | 4.71% | 2.24% |
| Communication Services | 11.41% | 11.44% |
| Utilities | 2.13% | 2.41% |
| Healthcare | 5.73% | 13.22% |
| Consumer Defensive | 5.68% | 8.57% |
| Real Estate | 2.75% | 2.72% |
| Financial Services | 16.9% | 15.87% |
| Consumer Cyclical | 15.67% | 9.43% |
| Basic Materials | 8.64% | 2.35% |
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 USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
IEMG is 2.08% less exposed to the Technology sector than QUAL (20.44% vs 22.52%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 1.03% higher and 6.24% higher respectively (16.9% vs. 15.87% and 15.67% vs. 9.43%). In total, Real Estate, Energy, and Consumer Defensive also make up 0.39% less of the fund’s holdings compared to QUAL (13.14% vs. 13.53%).
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%.
| QUAL Holdings | Weight |
| Facebook Inc Class A | 4.77% |
| Nike Inc Class B | 4.05% |
| Microsoft Corp | 3.54% |
| Apple Inc | 3.52% |
| Johnson & Johnson | 2.99% |
| BlackRock Inc | 2.87% |
| Target Corp | 2.8% |
| Mastercard Inc Class A | 2.72% |
| NVIDIA Corp | 2.71% |
| Alphabet Inc Class A | 2.49% |
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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Risk Analysis
| IEMG | QUAL | |
| Mean Return | 0 | 0 |
| R-squared | 0 | 0 |
| Std. Deviation | 0 | 0 |
| Alpha | 0 | 0 |
| Beta | 0 | 0 |
| Sharpe Ratio | 0 | 0 |
| Treynor Ratio | 0 | 0 |
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Beta of 0 with a Standard Deviation of 0 and a Treynor Ratio of 0. Its Sharpe Ratio is 0 while IEMG’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a R-squared of 0.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Alpha of 0 with a Standard Deviation of 0 and a R-squared of 0. Its Sharpe Ratio is 0 while QUAL’s Mean Return is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Beta of 0.
IEMG’s Mean Return is 0.00 points lower than that of QUAL and its R-squared is 0.00 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than QUAL. The Alpha and Beta of IEMG are 0.00 points lower and 0.00 points lower than QUAL’s Alpha and Beta.
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Performance
Annual Returns
| Year | IEMG | QUAL |
| 2020 | 18.18% | 16.96% |
| 2019 | 17.5% | 34.14% |
| 2018 | -14.69% | -5.77% |
| 2017 | 36.78% | 22.26% |
| 2016 | 9.98% | 9.18% |
| 2015 | -13.86% | 5.56% |
| 2014 | -2.04% | 11.62% |
| 2013 | -2.16% | 0.0% |
| 2012 | 0.0% | 0.0% |
| 2011 | 0.0% | 0.0% |
| 2010 | 0.0% | 0.0% |
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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IEMG | $10,000 | $15,037 | 7.41% |
| QUAL | $10,000 | $23,251 | 13.42% |
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 QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
IEMG’s CAGR is 6.01 percentage points lower than that of QUAL and as a result, would have yielded $8,214 less on a $10,000 investment. Thus, IEMG performed worse than QUAL by 6.01% annually.
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