The iShares MSCI USA Quality Factor ETF (QUAL) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between QUAL and EMB? And which fund is better?
The expense ratio of QUAL is 0.24 percentage points lower than EMB’s (0.15% vs. 0.39%). QUAL also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, QUAL has provided higher returns than EMB over the past 7 years.
In this article, we’ll compare QUAL vs. EMB. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and fund composition. Moreover, I’ll also discuss QUAL’s and EMB’s holdings, performance, and industry exposure and examine how these affect their overall returns.
|Name||iShares MSCI USA Quality Factor ETF||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Large Blend||Emerging Markets Bond|
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
QUAL’s dividend yield is 2.56% lower than that of EMB (1.29% vs. 3.85%). Also, QUAL yielded on average 6.99% more per year over the past decade (13.42% vs. 6.43%). The expense ratio of QUAL is 0.24 percentage points lower than EMB’s (0.15% vs. 0.39%).
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|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
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The iShares MSCI USA Quality Factor ETF (QUAL) has a R-squared of 0 with a Mean Return of 0 and a Beta of 0. Its Standard Deviation is 0 while QUAL’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Mean Return of 0.44 and a Alpha of 0.89. Its Treynor Ratio is 3.24 while EMB’s Beta is 1.36. Furthermore, the fund has a R-squared of 23.34 and a Standard Deviation of 8.44.
QUAL’s Mean Return is 0.44 points lower than that of EMB and its R-squared is 23.34 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than EMB. The Alpha and Beta of QUAL are 0.89 points lower and 1.36 points lower than EMB’s Alpha and Beta.
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QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% respectively.
The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.
With a $10,000 investment in EMB, the end total would have been $14,825. This equates to a $4,825 profit over 7 years and a compound annual growth rate (CAGR) of 6.43%.
QUAL’s CAGR is 6.99 percentage points higher than that of EMB and as a result, would have yielded $8,426 more on a $10,000 investment. Thus, QUAL outperformed EMB by 6.99% annually.
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