The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and SHY is a iShares Short Government fund. So, what’s the difference between IEMG and SHY? And which fund is better?
The expense ratio of IEMG is 0.04 percentage points lower than SHY’s (0.11% vs. 0.15%). IEMG also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, IEMG has provided higher returns than SHY over the past ten years.
In this article, we’ll compare IEMG vs. SHY. We’ll look at industry exposure and portfolio growth, as well as at their risk metrics and performance. Moreover, I’ll also discuss IEMG’s and SHY’s holdings, annual returns, and fund composition and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||iShares 1-3 Year Treasury Bond ETF|
|Category||Diversified Emerging Mkts||Short Government|
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
IEMG’s dividend yield is 1.32% higher than that of SHY (1.78% vs. 0.46%). Also, IEMG yielded on average 6.13% more per year over the past decade (7.41% vs. 1.27%). The expense ratio of IEMG is 0.04 percentage points lower than SHY’s (0.11% vs. 0.15%).
|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%.
|SHY Bond Sectors||Weight|
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Standard Deviation of 0 with a Treynor Ratio of 0 and a R-squared of 0. Its Mean Return is 0 while IEMG’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Sharpe Ratio of 0.54 with a Treynor Ratio of 2.6 and a Mean Return of 0.09. Its R-squared is 39.11 while SHY’s Standard Deviation is 0.89. Furthermore, the fund has a Alpha of -0.03 and a Beta of 0.18.
IEMG’s Mean Return is 0.09 points lower than that of SHY and its R-squared is 39.11 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than SHY. The Alpha and Beta of IEMG are 0.03 points higher and 0.18 points lower than SHY’s Alpha and Beta.
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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% 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 SHY, the end total would have been $11,017. This equates to a $1,017 profit over 7 years and a compound annual growth rate (CAGR) of 1.27%.
IEMG’s CAGR is 6.13 percentage points higher than that of SHY and as a result, would have yielded $4,020 more on a $10,000 investment. Thus, IEMG outperformed SHY by 6.13% annually.
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