IEMG vs. VEU: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between IEMG and VEU? And which fund is better?

The expense ratio of IEMG is 0.03 percentage points higher than VEU’s (0.11% vs. 0.08%). IEMG also has a higher exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided higher returns than VEU over the past ten years.

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

Summary

IEMG VEU
Name iShares Core MSCI Emerging Markets ETF Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Diversified Emerging Mkts Foreign Large Blend
Issuer iShares Vanguard
AUM 83.68B 53.64B
Avg. Return 7.41% 6.64%
Div. Yield 1.78% 2.31%
Expense Ratio 0.11% 0.08%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

IEMG’s dividend yield is 0.53% lower than that of VEU (1.78% vs. 2.31%). Also, IEMG yielded on average 0.77% more per year over the past decade (7.41% vs. 6.64%). The expense ratio of IEMG is 0.03 percentage points higher than VEU’s (0.11% vs. 0.08%).

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Fund Composition

Industry Exposure

IEMG vs. VEU - Industry Exposure

IEMG VEU
Technology 20.44% 12.94%
Industrials 5.92% 12.19%
Energy 4.71% 4.69%
Communication Services 11.41% 7.44%
Utilities 2.13% 2.89%
Healthcare 5.73% 9.34%
Consumer Defensive 5.68% 8.28%
Real Estate 2.75% 3.04%
Financial Services 16.9% 18.46%
Consumer Cyclical 15.67% 12.57%
Basic Materials 8.64% 8.17%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

IEMG is 7.50% more exposed to the Technology sector than VEU (20.44% vs 12.94%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 1.56% lower and 3.10% higher respectively (16.9% vs. 18.46% and 15.67% vs. 12.57%). In total, Real Estate, Energy, and Consumer Defensive also make up 2.87% less of the fund’s holdings compared to VEU (13.14% vs. 16.01%).

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%.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

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Risk Analysis

IEMG VEU
Mean Return 0 0.56
R-squared 0 98.44
Std. Deviation 0 15.08
Alpha 0 0.28
Beta 0 0.99
Sharpe Ratio 0 0.4
Treynor Ratio 0 5.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Alpha of 0.28 with a Standard Deviation of 15.08 and a R-squared of 98.44. Its Beta is 0.99 while VEU’s Treynor Ratio is 5.12. Furthermore, the fund has a Sharpe Ratio of 0.4 and a Mean Return of 0.56.

IEMG’s Mean Return is 0.56 points lower than that of VEU and its R-squared is 98.44 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VEU. The Alpha and Beta of IEMG are 0.28 points lower and 0.99 points lower than VEU’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. VEU - Annual Returns

Year IEMG VEU
2020 18.18% 11.39%
2019 17.5% 21.63%
2018 -14.69% -13.97%
2017 36.78% 27.27%
2016 9.98% 4.77%
2015 -13.86% -4.67%
2014 -2.04% -4.05%
2013 -2.16% 14.5%
2012 0.0% 18.55%
2011 0.0% -14.25%
2010 0.0% 11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

IEMG vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
VEU $10,000 $14,215 6.64%

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 VEU, the end total would have been $14,215. This equates to a $4,215 profit over 7 years and a compound annual growth rate (CAGR) of 6.64%.

IEMG’s CAGR is 0.77 percentage points higher than that of VEU and as a result, would have yielded $822 more on a $10,000 investment. Thus, IEMG outperformed VEU by 0.77% annually.


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