The iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IEMG and VMBS? And which fund is better?
The expense ratio of IEMG is 0.06 percentage points higher than VMBS’s (0.11% vs. 0.05%). IEMG also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, IEMG has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare IEMG vs. VMBS. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and holdings. Moreover, I’ll also discuss IEMG’s and VMBS’s fund composition, performance, and industry exposure and examine how these affect their overall returns.
Summary
| IEMG | VMBS | |
| Name | iShares Core MSCI Emerging Markets ETF | Vanguard Mortgage-Backed Securities Index Fund ETF Shares |
| Category | Diversified Emerging Mkts | Intermediate Government |
| Issuer | iShares | Vanguard |
| AUM | 83.68B | 16.61B |
| Avg. Return | 7.41% | 2.89% |
| Div. Yield | 1.78% | 1.23% |
| Expense Ratio | 0.11% | 0.05% |
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 Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
IEMG’s dividend yield is 0.55% higher than that of VMBS (1.78% vs. 1.23%). Also, IEMG yielded on average 4.51% more per year over the past decade (7.41% vs. 2.89%). The expense ratio of IEMG is 0.06 percentage points higher than VMBS’s (0.11% vs. 0.05%).
Fund Composition
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%.
| VMBS Bond Sectors | Weight |
| AAA | 100.01% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
| Others | -0.01% |
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
Risk Analysis
| IEMG | VMBS | |
| Mean Return | 0 | 0.21 |
| R-squared | 0 | 65.78 |
| Std. Deviation | 0 | 2.02 |
| Alpha | 0 | 0.37 |
| Beta | 0 | 0.54 |
| Sharpe Ratio | 0 | 0.94 |
| Treynor Ratio | 0 | 3.47 |
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Alpha of 0. Its Treynor Ratio is 0 while IEMG’s R-squared is 0. Furthermore, the fund has a Beta of 0 and a Standard Deviation of 0.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a R-squared of 65.78 with a Mean Return of 0.21 and a Treynor Ratio of 3.47. Its Alpha is 0.37 while VMBS’s Beta is 0.54. Furthermore, the fund has a Sharpe Ratio of 0.94 and a Standard Deviation of 2.02.
IEMG’s Mean Return is 0.21 points lower than that of VMBS and its R-squared is 65.78 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VMBS. The Alpha and Beta of IEMG are 0.37 points lower and 0.54 points lower than VMBS’s Alpha and Beta.
Performance
Annual Returns
| Year | IEMG | VMBS |
| 2020 | 18.18% | 3.77% |
| 2019 | 17.5% | 6.17% |
| 2018 | -14.69% | 0.87% |
| 2017 | 36.78% | 2.37% |
| 2016 | 9.98% | 1.43% |
| 2015 | -13.86% | 1.43% |
| 2014 | -2.04% | 5.81% |
| 2013 | -2.16% | -1.28% |
| 2012 | 0.0% | 2.47% |
| 2011 | 0.0% | 5.89% |
| 2010 | 0.0% | 5.24% |
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 VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IEMG | $10,000 | $15,037 | 7.41% |
| VMBS | $10,000 | $12,384 | 2.89% |
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 VMBS, the end total would have been $12,384. This equates to a $2,384 profit over 7 years and a compound annual growth rate (CAGR) of 2.89%.
IEMG’s CAGR is 4.51 percentage points higher than that of VMBS and as a result, would have yielded $2,653 more on a $10,000 investment. Thus, IEMG outperformed VMBS by 4.51% annually.
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