The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VB and EMB? And which fund is better?
The expense ratio of VB is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%). VB also has a high exposure to the technology sector while EMB is mostly comprised of BBB bonds. Overall, VB has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VB vs. EMB. We’ll look at holdings and risk metrics, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VB’s and EMB’s performance, portfolio growth, and fund composition and examine how these affect their overall returns.
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Summary
| VB | EMB | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Small Blend | Emerging Markets Bond |
| Issuer | Vanguard | iShares |
| AUM | 137.72B | 19.76B |
| Avg. Return | 14.25% | 6.43% |
| Div. Yield | 1.14% | 3.85% |
| Expense Ratio | 0.05% | 0.39% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
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%.
VB’s dividend yield is 2.71% lower than that of EMB (1.14% vs. 3.85%). Also, VB yielded on average 7.82% more per year over the past decade (14.25% vs. 6.43%). The expense ratio of VB is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%).
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Fund Composition
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
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.
Risk Analysis
| VB | EMB | |
| Mean Return | 1.15 | 0.44 |
| R-squared | 85.03 | 23.34 |
| Std. Deviation | 17.82 | 8.44 |
| Alpha | -4.02 | 0.89 |
| Beta | 1.21 | 1.36 |
| Sharpe Ratio | 0.74 | 0.55 |
| Treynor Ratio | 10.15 | 3.24 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Mean Return of 1.15 and a R-squared of 85.03. Its Treynor Ratio is 10.15 while VB’s Alpha is -4.02. Furthermore, the fund has a Beta of 1.21 and a Sharpe Ratio of 0.74.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Standard Deviation of 8.44 with a Treynor Ratio of 3.24 and a Mean Return of 0.44. Its Sharpe Ratio is 0.55 while EMB’s R-squared is 23.34. Furthermore, the fund has a Beta of 1.36 and a Alpha of 0.89.
VB’s Mean Return is 0.71 points higher than that of EMB and its R-squared is 61.69 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than EMB. The Alpha and Beta of VB are 4.91 points lower and 0.15 points lower than EMB’s Alpha and Beta.
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Performance
Annual Returns
| Year | VB | EMB |
| 2020 | 19.08% | 5.48% |
| 2019 | 27.37% | 15.57% |
| 2018 | -9.3% | -5.67% |
| 2017 | 16.24% | 9.98% |
| 2016 | 18.31% | 9.41% |
| 2015 | -3.65% | 0.43% |
| 2014 | 7.51% | 6.69% |
| 2013 | 37.8% | -7.42% |
| 2012 | 18.22% | 17.64% |
| 2011 | -2.68% | 7.2% |
| 2010 | 27.89% | 11.47% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $39,734 | 14.25% |
| EMB | $10,000 | $19,295 | 6.43% |
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
VB’s CAGR is 7.82 percentage points higher than that of EMB and as a result, would have yielded $20,439 more on a $10,000 investment. Thus, VB outperformed EMB by 7.82% annually.
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