The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares Core MSCI Emerging Markets ETF (IEMG) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and IEMG is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VEA and IEMG? And which fund is better?
The expense ratio of VEA is 0.06 percentage points lower than IEMG’s (0.05% vs. 0.11%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided lower returns than IEMG over the past ten years.
In this article, we’ll compare VEA vs. IEMG. We’ll look at annual returns and industry exposure, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VEA’s and IEMG’s holdings, performance, and fund composition and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares Core MSCI Emerging Markets ETF|
|Category||Foreign Large Blend||Diversified Emerging Mkts|
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 Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.
VEA’s dividend yield is 0.71% higher than that of IEMG (2.49% vs. 1.78%). Also, VEA yielded on average 0.36% less per year over the past decade (7.05% vs. 7.41%). The expense ratio of VEA is 0.06 percentage points lower than IEMG’s (0.05% vs. 0.11%).
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.
VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.
The iShares Core MSCI Emerging Markets ETF (IEMG) has the most exposure to the Technology sector at 20.44%. This is followed by Financial Services and Consumer Cyclical at 16.9% and 15.67% respectively. Real Estate (2.75%), Energy (4.71%), and Consumer Defensive (5.68%) only make up 13.14% of the fund’s total assets.
IEMG’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.73%, 5.92%, 8.64%, 11.41%, and 15.67%.
VEA is 0.49% more exposed to the Financial Services sector than IEMG (17.39% vs 16.9%). VEA’s exposure to Industrials and Technology stocks is 9.55% higher and 8.77% lower respectively (15.47% vs. 5.92% and 11.67% vs. 20.44%). In total, Real Estate, Energy, and Communication Services also make up 5.25% less of the fund’s holdings compared to IEMG (13.62% vs. 18.87%).
|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%|
|Shopify Inc A||0.7%|
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%.
|Taiwan Semiconductor Manufacturing Co Ltd||5.37%|
|Tencent Holdings Ltd||4.42%|
|Alibaba Group Holding Ltd Ordinary Shares||4.38%|
|Samsung Electronics Co Ltd||3.49%|
|Naspers Ltd Class N||0.93%|
|Reliance Industries Ltd Shs Dematerialised||0.83%|
|China Construction Bank Corp Class H||0.77%|
IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.
Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.
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 2017 was the strongest year for IEMG, returning 36.78% on an annual basis. The poorest year for IEMG in the last ten years was 2018, with a yield of -14.69%. Most years the iShares Core MSCI Emerging Markets ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $14,044. This is a profit of $4,044 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in IEMG, the end total would have been $15,037. This equates to a $5,037 profit over 7 years and a compound annual growth rate (CAGR) of 7.41%.
VEA’s CAGR is 0.36 percentage points lower than that of IEMG and as a result, would have yielded $993 less on a $10,000 investment. Thus, VEA performed worse than IEMG by 0.36% annually.
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