TIP vs. EFV: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between TIP and EFV? And which fund is better?

The expense ratio of TIP is 0.20 percentage points lower than EFV’s (0.19% vs. 0.39%). TIP is mostly comprised of AAA bonds while EFV has a high exposure to the financial services sector. Overall, TIP has provided higher returns than EFV over the past ten years.

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

Summary

TIP EFV
Name iShares TIPS Bond ETF iShares MSCI EAFE Value ETF
Category Inflation-Protected Bond Foreign Large Value
Issuer iShares iShares
AUM 28.3B 14.37B
Avg. Return 4.07% 3.99%
Div. Yield 1.87% 2.94%
Expense Ratio 0.19% 0.39%

The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

The iShares MSCI EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.

TIP’s dividend yield is 1.07% lower than that of EFV (1.87% vs. 2.94%). Also, TIP yielded on average 0.08% more per year over the past decade (4.07% vs. 3.99%). The expense ratio of TIP is 0.20 percentage points lower than EFV’s (0.19% vs. 0.39%).

Fund Composition

Holdings

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

EFV - Holdings

EFV Holdings Weight
Novartis AG 2.41%
Toyota Motor Corp 2.21%
Commonwealth Bank of Australia 1.59%
Siemens AG 1.45%
Sanofi SA 1.42%
HSBC Holdings PLC 1.4%
TotalEnergies SE 1.35%
Allianz SE 1.23%
GlaxoSmithKline PLC 1.18%
Rio Tinto PLC 1.1%

EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.

HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.

Risk Analysis

TIP EFV
Mean Return 0.28 0.42
R-squared 66.57 92.15
Std. Deviation 4.33 16.53
Alpha -0.58 -1.77
Beta 1.18 1.05
Sharpe Ratio 0.62 0.26
Treynor Ratio 2.24 2.92

The iShares TIPS Bond ETF (TIP) has a Sharpe Ratio of 0.62 with a Beta of 1.18 and a R-squared of 66.57. Its Alpha is -0.58 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a Treynor Ratio of 2.24 and a Mean Return of 0.28.

The iShares MSCI EAFE Value ETF (EFV) has a Mean Return of 0.42 with a R-squared of 92.15 and a Standard Deviation of 16.53. Its Sharpe Ratio is 0.26 while EFV’s Treynor Ratio is 2.92. Furthermore, the fund has a Beta of 1.05 and a Alpha of -1.77.

TIP’s Mean Return is 0.14 points lower than that of EFV and its R-squared is 25.58 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than EFV. The Alpha and Beta of TIP are 1.19 points higher and 0.13 points higher than EFV’s Alpha and Beta.

Performance

Annual Returns

TIP vs. EFV - Annual Returns

Year TIP EFV
2020 10.91% -2.78%
2019 8.28% 15.97%
2018 -1.43% -14.88%
2017 2.92% 21.22%
2016 4.56% 4.87%
2015 -1.59% -5.89%
2014 3.49% -5.65%
2013 -8.65% 22.61%
2012 6.8% 17.52%
2011 13.4% -12.24%
2010 6.1% 3.18%

TIP had its best year in 2011 with an annual return of 13.4%. TIP’s worst year over the past decade yielded -8.65% and occurred in 2013. In most years the iShares TIPS Bond ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to 3.49%, 4.56%, and 6.1% respectively.

The year 2013 was the strongest year for EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.

Portfolio Growth

TIP vs. EFV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
EFV $10,000 $14,134 3.99%

A $10,000 investment in TIP would have resulted in a final balance of $15,229. This is a profit of $5,229 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.

TIP’s CAGR is 0.08 percentage points higher than that of EFV and as a result, would have yielded $1,095 more on a $10,000 investment. Thus, TIP outperformed EFV by 0.08% annually.


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