IEMG vs. VO: What’s The Difference?

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

The expense ratio of IEMG is 0.07 percentage points higher than VO’s (0.11% vs. 0.04%). IEMG also has a lower exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than VO over the past ten years.

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

Summary

IEMG VO
Name iShares Core MSCI Emerging Markets ETF Vanguard Mid-Cap Index Fund ETF Shares
Category Diversified Emerging Mkts Mid-Cap Blend
Issuer iShares Vanguard
AUM 83.68B 154.08B
Avg. Return 7.41% 14.34%
Div. Yield 1.78% 1.23%
Expense Ratio 0.11% 0.04%

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 Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

IEMG’s dividend yield is 0.55% higher than that of VO (1.78% vs. 1.23%). Also, IEMG yielded on average 6.93% less per year over the past decade (7.41% vs. 14.34%). The expense ratio of IEMG is 0.07 percentage points higher than VO’s (0.11% vs. 0.04%).

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Fund Composition

Industry Exposure

IEMG vs. VO - Industry Exposure

IEMG VO
Technology 20.44% 22.01%
Industrials 5.92% 11.92%
Energy 4.71% 3.82%
Communication Services 11.41% 5.61%
Utilities 2.13% 5.12%
Healthcare 5.73% 13.03%
Consumer Defensive 5.68% 3.25%
Real Estate 2.75% 8.67%
Financial Services 16.9% 11.08%
Consumer Cyclical 15.67% 12.12%
Basic Materials 8.64% 3.36%

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 Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

IEMG is 1.57% less exposed to the Technology sector than VO (20.44% vs 22.01%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 5.82% higher and 3.55% higher respectively (16.9% vs. 11.08% and 15.67% vs. 12.12%). In total, Real Estate, Energy, and Consumer Defensive also make up 2.60% less of the fund’s holdings compared to VO (13.14% vs. 15.74%).

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%.

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
Marvell Technology Inc 0.68%
IQVIA Holdings Inc 0.68%
Chipotle Mexican Grill Inc 0.63%
Veeva Systems Inc Class A 0.62%
Digital Realty Trust Inc 0.62%
Centene Corp 0.62%
Aptiv PLC 0.62%
Carrier Global Corp Ordinary Shares 0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

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Risk Analysis

IEMG VO
Mean Return 0 1.14
R-squared 0 92.22
Std. Deviation 0 15.65
Alpha 0 -2.71
Beta 0 1.11
Sharpe Ratio 0 0.83
Treynor Ratio 0 11.32

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Mean Return of 0 with a Treynor Ratio of 0 and a Sharpe Ratio of 0. Its Alpha 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 Mid-Cap Index Fund ETF Shares (VO) has a Treynor Ratio of 11.32 with a Standard Deviation of 15.65 and a Beta of 1.11. Its Mean Return is 1.14 while VO’s Alpha is -2.71. Furthermore, the fund has a R-squared of 92.22 and a Sharpe Ratio of 0.83.

IEMG’s Mean Return is 1.14 points lower than that of VO and its R-squared is 92.22 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than VO. The Alpha and Beta of IEMG are 2.71 points higher and 1.11 points lower than VO’s Alpha and Beta.

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Performance

Annual Returns

IEMG vs. VO - Annual Returns

Year IEMG VO
2020 18.18% 18.22%
2019 17.5% 31.04%
2018 -14.69% -9.21%
2017 36.78% 19.25%
2016 9.98% 11.23%
2015 -13.86% -1.34%
2014 -2.04% 13.76%
2013 -2.16% 35.15%
2012 0.0% 15.98%
2011 0.0% -1.96%
2010 0.0% 25.57%

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 VO, returning 35.15% on an annual basis. The poorest year for VO in the last ten years was 2018, with a yield of -9.21%. Most years the Vanguard Mid-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2020, when gains were 13.76%, 15.98%, and 18.22% respectively.

Portfolio Growth

IEMG vs. VO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEMG $10,000 $15,037 7.41%
VO $10,000 $20,938 14.34%

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 VO, the end total would have been $20,938. This equates to a $10,938 profit over 7 years and a compound annual growth rate (CAGR) of 14.34%.

IEMG’s CAGR is 6.93 percentage points lower than that of VO and as a result, would have yielded $5,901 less on a $10,000 investment. Thus, IEMG performed worse than VO by 6.93% annually.


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