The iShares Core S&P Small-Cap ETF (IJR) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. IJR is a iShares Small Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between IJR and EEM? And which fund is better?
The expense ratio of IJR is 0.62 percentage points lower than EEM’s (0.06% vs. 0.68%). IJR also has a higher exposure to the industrials sector and a higher standard deviation. Overall, IJR has provided higher returns than EEM over the past ten years.
In this article, we’ll compare IJR vs. EEM. We’ll look at annual returns and performance, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss IJR’s and EEM’s portfolio growth, fund composition, and holdings and examine how these affect their overall returns.
Summary
| IJR | EEM | |
| Name | iShares Core S&P Small-Cap ETF | iShares MSCI Emerging Markets ETF |
| Category | Small Blend | Diversified Emerging Mkts |
| Issuer | iShares | iShares |
| AUM | 68.64B | 30.33B |
| Avg. Return | 13.97% | 5.47% |
| Div. Yield | 0.96% | 1.48% |
| Expense Ratio | 0.06% | 0.68% |
The iShares Core S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
IJR’s dividend yield is 0.52% lower than that of EEM (0.96% vs. 1.48%). Also, IJR yielded on average 8.50% more per year over the past decade (13.97% vs. 5.47%). The expense ratio of IJR is 0.62 percentage points lower than EEM’s (0.06% vs. 0.68%).
Fund Composition
Industry Exposure
| IJR | EEM | |
| Technology | 14.32% | 21.36% |
| Industrials | 17.31% | 4.61% |
| Energy | 4.0% | 5.17% |
| Communication Services | 2.59% | 11.76% |
| Utilities | 1.8% | 1.99% |
| Healthcare | 11.55% | 5.06% |
| Consumer Defensive | 4.01% | 5.45% |
| Real Estate | 9.55% | 1.98% |
| Financial Services | 15.91% | 18.39% |
| Consumer Cyclical | 13.61% | 15.16% |
| Basic Materials | 5.34% | 9.07% |
The iShares Core S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.
IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
IJR is 12.70% more exposed to the Industrials sector than EEM (17.31% vs 4.61%). IJR’s exposure to Financial Services and Technology stocks is 2.48% lower and 7.04% lower respectively (15.91% vs. 18.39% and 14.32% vs. 21.36%). In total, Communication Services, Energy, and Consumer Defensive also make up 11.78% less of the fund’s holdings compared to EEM (10.60% vs. 22.38%).
Holdings
| IJR Holdings | Weight |
| BlackRock Cash Funds Treasury SL Agency | 1.08% |
| GameStop Corp Class A | 0.86% |
| Omnicell Inc | 0.61% |
| Stamps.com Inc | 0.58% |
| Saia Inc | 0.57% |
| Power Integrations Inc | 0.57% |
| Exponent Inc | 0.54% |
| NeoGenomics Inc | 0.53% |
| Chart Industries Inc | 0.53% |
| Macy’s Inc | 0.51% |
IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.
Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.
| EEM Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 6.36% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.58% |
| Tencent Holdings Ltd | 4.41% |
| Samsung Electronics Co Ltd | 4.05% |
| Meituan | 1.24% |
| Vale SA | 1.04% |
| Naspers Ltd Class N | 1.04% |
| Reliance Industries Ltd Shs Dematerialised | 0.97% |
| Infosys Ltd | 0.92% |
| China Construction Bank Corp Class H | 0.83% |
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
Risk Analysis
| IJR | EEM | |
| Mean Return | 1.21 | 0.38 |
| R-squared | 76.03 | 83.5 |
| Std. Deviation | 18.68 | 17.79 |
| Alpha | -3.7 | -2.33 |
| Beta | 1.2 | 1.08 |
| Sharpe Ratio | 0.74 | 0.22 |
| Treynor Ratio | 10.77 | 2.22 |
The iShares Core S&P Small-Cap ETF (IJR) has a R-squared of 76.03 with a Mean Return of 1.21 and a Standard Deviation of 18.68. Its Alpha is -3.7 while IJR’s Treynor Ratio is 10.77. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Beta of 1.2.
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Standard Deviation of 17.79 and a Treynor Ratio of 2.22. Its Sharpe Ratio is 0.22 while EEM’s Alpha is -2.33. Furthermore, the fund has a R-squared of 83.5 and a Beta of 1.08.
IJR’s Mean Return is 0.83 points higher than that of EEM and its R-squared is 7.47 points lower. With a Standard Deviation of 18.68, IJR is slightly more volatile than EEM. The Alpha and Beta of IJR are 1.37 points lower and 0.12 points higher than EEM’s Alpha and Beta.
Performance
Annual Returns
| Year | IJR | EEM |
| 2020 | 11.24% | 17.56% |
| 2019 | 22.79% | 17.67% |
| 2018 | -8.43% | -14.98% |
| 2017 | 13.2% | 36.42% |
| 2016 | 26.49% | 10.51% |
| 2015 | -2.0% | -15.41% |
| 2014 | 5.67% | -2.82% |
| 2013 | 41.36% | -3.14% |
| 2012 | 16.28% | 17.32% |
| 2011 | 0.9% | -18.87% |
| 2010 | 26.14% | 15.93% |
IJR had its best year in 2013 with an annual return of 41.36%. IJR’s worst year over the past decade yielded -8.43% and occurred in 2018. In most years the iShares Core S&P Small-Cap ETF provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 11.24%, 13.2%, and 16.28% respectively.
The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IJR | $10,000 | $38,800 | 13.97% |
| EEM | $10,000 | $15,578 | 5.47% |
A $10,000 investment in IJR would have resulted in a final balance of $38,800. This is a profit of $28,800 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.97%.
With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.
IJR’s CAGR is 8.50 percentage points higher than that of EEM and as a result, would have yielded $23,222 more on a $10,000 investment. Thus, IJR outperformed EEM by 8.50% annually.
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