IEMG vs. TIP: What’s The Difference?

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

The expense ratio of IEMG is 0.08 percentage points lower than TIP’s (0.11% vs. 0.19%). IEMG also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, IEMG has provided higher returns than TIP over the past ten years.

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

Summary

IEMG TIP
Name iShares Core MSCI Emerging Markets ETF iShares TIPS Bond ETF
Category Diversified Emerging Mkts Inflation-Protected Bond
Issuer iShares iShares
AUM 83.68B 28.3B
Avg. Return 7.41% 4.07%
Div. Yield 1.78% 1.87%
Expense Ratio 0.11% 0.19%

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 TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

IEMG’s dividend yield is 0.09% lower than that of TIP (1.78% vs. 1.87%). Also, IEMG yielded on average 3.34% more per year over the past decade (7.41% vs. 4.07%). The expense ratio of IEMG is 0.08 percentage points lower than TIP’s (0.11% vs. 0.19%).

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%.

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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.

Risk Analysis

IEMG TIP
Mean Return 0 0.28
R-squared 0 66.57
Std. Deviation 0 4.33
Alpha 0 -0.58
Beta 0 1.18
Sharpe Ratio 0 0.62
Treynor Ratio 0 2.24

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

The iShares TIPS Bond ETF (TIP) has a Standard Deviation of 4.33 with a Mean Return of 0.28 and a Alpha of -0.58. Its Beta is 1.18 while TIP’s R-squared is 66.57. Furthermore, the fund has a Treynor Ratio of 2.24 and a Sharpe Ratio of 0.62.

IEMG’s Mean Return is 0.28 points lower than that of TIP and its R-squared is 66.57 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than TIP. The Alpha and Beta of IEMG are 0.58 points higher and 1.18 points lower than TIP’s Alpha and Beta.

Performance

Annual Returns

IEMG vs. TIP - Annual Returns

Year IEMG TIP
2020 18.18% 10.91%
2019 17.5% 8.28%
2018 -14.69% -1.43%
2017 36.78% 2.92%
2016 9.98% 4.56%
2015 -13.86% -1.59%
2014 -2.04% 3.49%
2013 -2.16% -8.65%
2012 0.0% 6.8%
2011 0.0% 13.4%
2010 0.0% 6.1%

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 TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.

Portfolio Growth

IEMG vs. TIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
TIP $10,000 $12,973 4.07%

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 TIP, the end total would have been $12,973. This equates to a $2,973 profit over 7 years and a compound annual growth rate (CAGR) of 4.07%.

IEMG’s CAGR is 3.34 percentage points higher than that of TIP and as a result, would have yielded $2,064 more on a $10,000 investment. Thus, IEMG outperformed TIP by 3.34% annually.


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