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IEMG vs. VGK: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between IEMG and VGK? And which fund is better?

The expense ratio of IEMG is 0.03 percentage points higher than VGK’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 VGK over the past ten years.

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

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Summary

IEMGVGK
NameiShares Core MSCI Emerging Markets ETFVanguard FTSE Europe Index Fund ETF Shares
CategoryDiversified Emerging MktsEurope Stock
IssueriSharesVanguard
AUM83.68B25.7B
Avg. Return7.41%6.68%
Div. Yield1.78%2.52%
Expense Ratio0.11%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 Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

IEMG’s dividend yield is 0.74% lower than that of VGK (1.78% vs. 2.52%). Also, IEMG yielded on average 0.73% more per year over the past decade (7.41% vs. 6.68%). The expense ratio of IEMG is 0.03 percentage points higher than VGK’s (0.11% vs. 0.08%).

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Fund Composition

Industry Exposure

IEMG vs. VGK - Industry Exposure

IEMGVGK
Technology20.44%8.3%
Industrials5.92%15.58%
Energy4.71%4.3%
Communication Services11.41%5.09%
Utilities2.13%3.89%
Healthcare5.73%13.76%
Consumer Defensive5.68%11.39%
Real Estate2.75%2.57%
Financial Services16.9%15.85%
Consumer Cyclical15.67%11.6%
Basic Materials8.64%7.67%

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 Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

IEMG is 12.14% more exposed to the Technology sector than VGK (20.44% vs 8.3%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 1.05% higher and 4.07% higher respectively (16.9% vs. 15.85% and 15.67% vs. 11.6%). In total, Real Estate, Energy, and Consumer Defensive also make up 5.12% less of the fund’s holdings compared to VGK (13.14% vs. 18.26%).

Holdings

IEMG - Holdings

IEMG HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd5.37%
Tencent Holdings Ltd4.42%
Alibaba Group Holding Ltd Ordinary Shares4.38%
Samsung Electronics Co Ltd3.49%
Meituan1.52%
Naspers Ltd Class N0.93%
Vale SA0.91%
Reliance Industries Ltd Shs Dematerialised0.83%
China Construction Bank Corp Class H0.77%
Infosys Ltd0.74%

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%.

VGK - Holdings

VGK HoldingsWeight
Nestle SA2.82%
ASML Holding NV2.2%
Roche Holding AG2.13%
LVMH Moet Hennessy Louis Vuitton SE1.58%
Novartis AG1.55%
AstraZeneca PLC1.27%
SAP SE1.25%
Unilever PLC1.23%
Novo Nordisk A/S B1.09%
Siemens AG0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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Risk Analysis

IEMGVGK
Mean Return00.61
R-squared092.76
Std. Deviation016.65
Alpha00.45
Beta01.06
Sharpe Ratio00.4
Treynor Ratio05.12

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Beta of 1.06 with a Alpha of 0.45 and a Standard Deviation of 16.65. Its Sharpe Ratio is 0.4 while VGK’s R-squared is 92.76. Furthermore, the fund has a Mean Return of 0.61 and a Treynor Ratio of 5.12.

IEMG’s Mean Return is 0.61 points lower than that of VGK and its R-squared is 92.76 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VGK. The Alpha and Beta of IEMG are 0.45 points lower and 1.06 points lower than VGK’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. VGK - Annual Returns

YearIEMGVGK
202018.18%6.5%
201917.5%24.26%
2018-14.69%-14.79%
201736.78%27.06%
20169.98%-0.59%
2015-13.86%-1.87%
2014-2.04%-6.56%
2013-2.16%24.93%
20120.0%21.01%
20110.0%-11.49%
20100.0%5.01%

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 VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

IEMG vs. VGK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEMG$10,000$15,0377.41%
VGK$10,000$13,0606.68%

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 VGK, the end total would have been $13,060. This equates to a $3,060 profit over 7 years and a compound annual growth rate (CAGR) of 6.68%.

IEMG’s CAGR is 0.73 percentage points higher than that of VGK and as a result, would have yielded $1,977 more on a $10,000 investment. Thus, IEMG outperformed VGK by 0.73% annually.


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