IEMG vs. VNQ: What’s The Difference?

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

The expense ratio of IEMG is 0.01 percentage points lower than VNQ’s (0.11% vs. 0.12%). IEMG also has a higher exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than VNQ over the past ten years.

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

Summary

IEMG VNQ
Name iShares Core MSCI Emerging Markets ETF Vanguard Real Estate Index Fund ETF Shares
Category Diversified Emerging Mkts Real Estate
Issuer iShares Vanguard
AUM 83.68B 77.34B
Avg. Return 7.41% 11.05%
Div. Yield 1.78% 2.34%
Expense Ratio 0.11% 0.12%

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 Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.

IEMG’s dividend yield is 0.56% lower than that of VNQ (1.78% vs. 2.34%). Also, IEMG yielded on average 3.64% less per year over the past decade (7.41% vs. 11.05%). The expense ratio of IEMG is 0.01 percentage points lower than VNQ’s (0.11% vs. 0.12%).

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Fund Composition

Industry Exposure

IEMG vs. VNQ - Industry Exposure

IEMG VNQ
Technology 20.44% 0.0%
Industrials 5.92% 0.0%
Energy 4.71% 0.0%
Communication Services 11.41% 0.0%
Utilities 2.13% 0.0%
Healthcare 5.73% 0.0%
Consumer Defensive 5.68% 0.0%
Real Estate 2.75% 100.0%
Financial Services 16.9% 0.0%
Consumer Cyclical 15.67% 0.0%
Basic Materials 8.64% 0.0%

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 Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VNQ’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

IEMG is 20.44% more exposed to the Technology sector than VNQ (20.44% vs 0.0%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 16.90% higher and 15.67% higher respectively (16.9% vs. 0.0% and 15.67% vs. 0.0%). In total, Real Estate, Energy, and Consumer Defensive also make up 86.86% less of the fund’s holdings compared to VNQ (13.14% vs. 100.00%).

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%.

VNQ - Holdings

VNQ Holdings Weight
Vanguard Real Estate II Index 11.62%
American Tower Corp 7.24%
Prologis Inc 5.33%
Crown Castle International Corp 5.01%
Equinix Inc 4.3%
Public Storage 2.85%
Simon Property Group Inc 2.52%
Digital Realty Trust Inc 2.49%
SBA Communications Corp 2.1%
Welltower Inc 2.09%

VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.

Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.

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Risk Analysis

IEMG VNQ
Mean Return 0 0.89
R-squared 0 44.4
Std. Deviation 0 16.13
Alpha 0 2.47
Beta 0 0.76
Sharpe Ratio 0 0.62
Treynor Ratio 0 11.9

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

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Standard Deviation of 16.13 with a Alpha of 2.47 and a R-squared of 44.4. Its Treynor Ratio is 11.9 while VNQ’s Mean Return is 0.89. Furthermore, the fund has a Sharpe Ratio of 0.62 and a Beta of 0.76.

IEMG’s Mean Return is 0.89 points lower than that of VNQ and its R-squared is 44.40 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VNQ. The Alpha and Beta of IEMG are 2.47 points lower and 0.76 points lower than VNQ’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. VNQ - Annual Returns

Year IEMG VNQ
2020 18.18% -4.72%
2019 17.5% 28.91%
2018 -14.69% -5.95%
2017 36.78% 4.95%
2016 9.98% 8.53%
2015 -13.86% 2.37%
2014 -2.04% 30.29%
2013 -2.16% 2.42%
2012 0.0% 17.67%
2011 0.0% 8.62%
2010 0.0% 28.44%

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 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.

Portfolio Growth

IEMG vs. VNQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
VNQ $10,000 $17,549 11.05%

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 VNQ, the end total would have been $17,549. This equates to a $7,549 profit over 7 years and a compound annual growth rate (CAGR) of 11.05%.

IEMG’s CAGR is 3.64 percentage points lower than that of VNQ and as a result, would have yielded $2,512 less on a $10,000 investment. Thus, IEMG performed worse than VNQ by 3.64% annually.


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