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IEMG vs. VHT: What’s The Difference?

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

The expense ratio of IEMG is 0.01 percentage points higher than VHT’s (0.11% vs. 0.1%). IEMG also has a higher exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than VHT over the past ten years.

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

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Summary

IEMGVHT
NameiShares Core MSCI Emerging Markets ETFVanguard Health Care Index Fund ETF Shares
CategoryDiversified Emerging MktsHealth
IssueriSharesVanguard
AUM83.68B17.94B
Avg. Return7.41%16.04%
Div. Yield1.78%1.15%
Expense Ratio0.11%0.1%

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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

IEMG’s dividend yield is 0.63% higher than that of VHT (1.78% vs. 1.15%). Also, IEMG yielded on average 8.63% less per year over the past decade (7.41% vs. 16.04%). The expense ratio of IEMG is 0.01 percentage points higher than VHT’s (0.11% vs. 0.1%).

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Fund Composition

Industry Exposure

IEMG vs. VHT - Industry Exposure

IEMGVHT
Technology20.44%0.05%
Industrials5.92%0.05%
Energy4.71%0.0%
Communication Services11.41%0.0%
Utilities2.13%0.0%
Healthcare5.73%99.57%
Consumer Defensive5.68%0.0%
Real Estate2.75%0.0%
Financial Services16.9%0.02%
Consumer Cyclical15.67%0.0%
Basic Materials8.64%0.31%

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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

IEMG is 20.39% more exposed to the Technology sector than VHT (20.44% vs 0.05%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 16.88% higher and 15.67% higher respectively (16.9% vs. 0.02% and 15.67% vs. 0.0%). In total, Real Estate, Energy, and Consumer Defensive also make up 13.14% more of the fund’s holdings compared to VHT (13.14% vs. 0.00%).

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%.

VHT - Holdings

VHT HoldingsWeight
Johnson & Johnson7.34%
UnitedHealth Group Inc6.44%
Pfizer Inc3.7%
Abbott Laboratories3.48%
Thermo Fisher Scientific Inc3.37%
AbbVie Inc3.37%
Merck & Co Inc3.33%
Eli Lilly and Co3.17%
Danaher Corp2.91%
Medtronic PLC2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

IEMGVHT
Mean Return01.33
R-squared059.86
Std. Deviation013.58
Alpha07.99
Beta00.75
Sharpe Ratio01.13
Treynor Ratio020.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a R-squared of 59.86 and a Treynor Ratio of 20.74. Its Standard Deviation is 13.58 while VHT’s Alpha is 7.99. Furthermore, the fund has a Beta of 0.75 and a Sharpe Ratio of 1.13.

IEMG’s Mean Return is 1.33 points lower than that of VHT and its R-squared is 59.86 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VHT. The Alpha and Beta of IEMG are 7.99 points lower and 0.75 points lower than VHT’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. VHT - Annual Returns

YearIEMGVHT
202018.18%18.21%
201917.5%21.97%
2018-14.69%5.55%
201736.78%23.34%
20169.98%-3.33%
2015-13.86%7.22%
2014-2.04%25.38%
2013-2.16%42.67%
20120.0%19.1%
20110.0%10.57%
20100.0%5.75%

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 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

IEMG vs. VHT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEMG$10,000$15,0377.41%
VHT$10,000$24,39216.04%

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 VHT, the end total would have been $24,392. This equates to a $14,392 profit over 7 years and a compound annual growth rate (CAGR) of 16.04%.

IEMG’s CAGR is 8.63 percentage points lower than that of VHT and as a result, would have yielded $9,355 less on a $10,000 investment. Thus, IEMG performed worse than VHT by 8.63% annually.


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