IEMG vs. SCHP: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between IEMG and SCHP? And which fund is better?

The expense ratio of IEMG is 0.06 percentage points higher than SCHP’s (0.11% vs. 0.05%). IEMG also has a high exposure to the technology sector while SCHP is mostly comprised of AAA bonds. Overall, IEMG has provided higher returns than SCHP over the past ten years.

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

Summary

IEMG SCHP
Name iShares Core MSCI Emerging Markets ETF Schwab U.S. TIPS ETF
Category Diversified Emerging Mkts Inflation-Protected Bond
Issuer iShares Schwab ETFs
AUM 83.68B 18.41B
Avg. Return 7.41% 3.92%
Div. Yield 1.78% 1.97%
Expense Ratio 0.11% 0.05%

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 Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

IEMG’s dividend yield is 0.19% lower than that of SCHP (1.78% vs. 1.97%). Also, IEMG yielded on average 3.49% more per year over the past decade (7.41% vs. 3.92%). The expense ratio of IEMG is 0.06 percentage points higher than SCHP’s (0.11% vs. 0.05%).

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Fund Composition

Holdings

IEMG - 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%.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’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

IEMG SCHP
Mean Return 0 0.28
R-squared 0 66.16
Std. Deviation 0 4.32
Alpha 0 -0.5
Beta 0 1.17
Sharpe Ratio 0 0.64
Treynor Ratio 0 2.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Standard Deviation of 4.32 with a Alpha of -0.5 and a Treynor Ratio of 2.31. Its R-squared is 66.16 while SCHP’s Sharpe Ratio is 0.64. Furthermore, the fund has a Beta of 1.17 and a Mean Return of 0.28.

IEMG’s Mean Return is 0.28 points lower than that of SCHP and its R-squared is 66.16 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than SCHP. The Alpha and Beta of IEMG are 0.50 points higher and 1.17 points lower than SCHP’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. SCHP - Annual Returns

Year IEMG SCHP
2020 18.18% 10.94%
2019 17.5% 8.36%
2018 -14.69% -1.31%
2017 36.78% 2.95%
2016 9.98% 4.6%
2015 -13.86% -1.5%
2014 -2.04% 3.56%
2013 -2.16% -8.66%
2012 0.0% 6.83%
2011 0.0% 13.38%
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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

IEMG vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
SCHP $10,000 $13,032 3.92%

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 SCHP, the end total would have been $13,032. This equates to a $3,032 profit over 7 years and a compound annual growth rate (CAGR) of 3.92%.

IEMG’s CAGR is 3.49 percentage points higher than that of SCHP and as a result, would have yielded $2,005 more on a $10,000 investment. Thus, IEMG outperformed SCHP by 3.49% annually.


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