VEA vs. EMB: What’s The Difference?

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VEA and EMB? And which fund is better?

The expense ratio of VEA is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%). VEA also has a high exposure to the financial services sector while EMB is mostly comprised of BBB bonds. Overall, VEA has provided higher returns than EMB over the past ten years.

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

Summary

VEA EMB
Name Vanguard FTSE Developed Markets Index Fund ETF Shares iShares J.P. Morgan USD Emerging Markets Bond ETF
Category Foreign Large Blend Emerging Markets Bond
Issuer Vanguard iShares
AUM 157.48B 19.76B
Avg. Return 7.05% 6.43%
Div. Yield 2.49% 3.85%
Expense Ratio 0.05% 0.39%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.

VEA’s dividend yield is 1.36% lower than that of EMB (2.49% vs. 3.85%). Also, VEA yielded on average 0.62% more per year over the past decade (7.05% vs. 6.43%). The expense ratio of VEA is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%).

Fund Composition

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
Samsung Electronics Co Ltd 1.4%
ASML Holding NV 1.16%
Roche Holding AG 1.1%
Toyota Motor Corp 0.92%
LVMH Moet Hennessy Louis Vuitton SE 0.84%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.

LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.

EMB - Holdings

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.

Performance

Annual Returns

VEA vs. EMB - Annual Returns

Year VEA EMB
2020 10.29% 5.48%
2019 22.08% 15.57%
2018 -14.47% -5.67%
2017 26.44% 9.98%
2016 2.51% 9.41%
2015 -0.21% 0.43%
2014 -5.71% 6.69%
2013 22.12% -7.42%
2012 18.6% 17.64%
2011 -12.57% 7.2%
2010 8.47% 11.47%

VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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

VEA vs. EMB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $19,290 7.05%
EMB $10,000 $19,295 6.43%

A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.

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%.

VEA’s CAGR is 0.62 percentage points higher than that of EMB and as a result, would have yielded $5 less on a $10,000 investment. Thus, VEA outperformed EMB by 0.62% annually.


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