The iShares Core MSCI Emerging Markets ETF (IEMG) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between IEMG and XLK? And which fund is better?
The expense ratio of IEMG is 0.01 percentage points lower than XLK’s (0.11% vs. 0.12%). IEMG also has a lower exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than XLK over the past ten years.
In this article, we’ll compare IEMG vs. XLK. We’ll look at risk metrics and fund composition, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss IEMG’s and XLK’s portfolio growth, holdings, and performance and examine how these affect their overall returns.
|Name||iShares Core MSCI Emerging Markets ETF||Technology Select Sector SPDR Fund|
|Category||Diversified Emerging Mkts||Technology|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.
IEMG’s dividend yield is 1.05% higher than that of XLK (1.78% vs. 0.73%). Also, IEMG yielded on average 12.62% less per year over the past decade (7.41% vs. 20.02%). The expense ratio of IEMG is 0.01 percentage points lower than XLK’s (0.11% vs. 0.12%).
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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLK’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 1.75%.
IEMG is 67.10% less exposed to the Technology sector than XLK (20.44% vs 87.54%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 6.19% higher and 15.67% higher respectively (16.9% vs. 10.71% 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 XLK (13.14% vs. 0.00%).
|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%|
|Naspers Ltd Class N||0.93%|
|Reliance Industries Ltd Shs Dematerialised||0.83%|
|China Construction Bank Corp Class H||0.77%|
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%.
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|Cisco Systems Inc||2.23%|
XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.
Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Treynor Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Beta is 0 while IEMG’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.
The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a Sharpe Ratio of 1.27 and a R-squared of 73.56. Its Standard Deviation is 15.58 while XLK’s Alpha is 10.43. Furthermore, the fund has a Mean Return of 1.7 and a Beta of 0.95.
IEMG’s Mean Return is 1.70 points lower than that of XLK and its R-squared is 73.56 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLK. The Alpha and Beta of IEMG are 10.43 points lower and 0.95 points lower than XLK’s Alpha and Beta.
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 XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLK, the end total would have been $40,663. This equates to a $30,663 profit over 7 years and a compound annual growth rate (CAGR) of 20.02%.
IEMG’s CAGR is 12.62 percentage points lower than that of XLK and as a result, would have yielded $25,626 less on a $10,000 investment. Thus, IEMG performed worse than XLK by 12.62% annually.
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