The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VEU and EMB? And which fund is better?
The expense ratio of VEU is 0.31 percentage points lower than EMB’s (0.08% vs. 0.39%). VEU also has a high exposure to the financial services sector while EMB is mostly comprised of BBB bonds. Overall, VEU has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VEU vs. EMB. We’ll look at holdings and risk metrics, as well as at their fund composition and performance. Moreover, I’ll also discuss VEU’s and EMB’s portfolio growth, industry exposure, and annual returns and examine how these affect their overall returns.
Summary
| VEU | EMB | |
| Name | Vanguard FTSE All-World ex-US Index Fund ETF Shares | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Foreign Large Blend | Emerging Markets Bond |
| Issuer | Vanguard | iShares |
| AUM | 53.64B | 19.76B |
| Avg. Return | 6.64% | 6.43% |
| Div. Yield | 2.31% | 3.85% |
| Expense Ratio | 0.08% | 0.39% |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.
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%.
VEU’s dividend yield is 1.54% lower than that of EMB (2.31% vs. 3.85%). Also, VEU yielded on average 0.20% more per year over the past decade (6.64% vs. 6.43%). The expense ratio of VEU is 0.31 percentage points lower than EMB’s (0.08% vs. 0.39%).
Fund Composition
Holdings
| VEU Holdings | Weight |
| Tencent Holdings Ltd | 1.57% |
| Alibaba Group Holding Ltd Ordinary Shares | 1.4% |
| Nestle SA | 1.22% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.98% |
| ASML Holding NV | 0.95% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 0.91% |
| Roche Holding AG | 0.91% |
| Toyota Motor Corp | 0.75% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.68% |
| Novartis AG | 0.67% |
VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.
Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.
| 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
| VEU | EMB | |
| Mean Return | 0.56 | 0.44 |
| R-squared | 98.44 | 23.34 |
| Std. Deviation | 15.08 | 8.44 |
| Alpha | 0.28 | 0.89 |
| Beta | 0.99 | 1.36 |
| Sharpe Ratio | 0.4 | 0.55 |
| Treynor Ratio | 5.12 | 3.24 |
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Alpha of 0.28 with a Standard Deviation of 15.08 and a Mean Return of 0.56. Its Sharpe Ratio is 0.4 while VEU’s R-squared is 98.44. Furthermore, the fund has a Beta of 0.99 and a Treynor Ratio of 5.12.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a R-squared of 23.34 with a Beta of 1.36 and a Sharpe Ratio of 0.55. Its Mean Return is 0.44 while EMB’s Alpha is 0.89. Furthermore, the fund has a Treynor Ratio of 3.24 and a Standard Deviation of 8.44.
VEU’s Mean Return is 0.12 points higher than that of EMB and its R-squared is 75.10 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than EMB. The Alpha and Beta of VEU are 0.61 points lower and 0.37 points lower than EMB’s Alpha and Beta.
Performance
Annual Returns
| Year | VEU | EMB |
| 2020 | 11.39% | 5.48% |
| 2019 | 21.63% | 15.57% |
| 2018 | -13.97% | -5.67% |
| 2017 | 27.27% | 9.98% |
| 2016 | 4.77% | 9.41% |
| 2015 | -4.67% | 0.43% |
| 2014 | -4.05% | 6.69% |
| 2013 | 14.5% | -7.42% |
| 2012 | 18.55% | 17.64% |
| 2011 | -14.25% | 7.2% |
| 2010 | 11.85% | 11.47% |
VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% 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 |
| VEU | $10,000 | $18,507 | 6.64% |
| EMB | $10,000 | $19,295 | 6.43% |
A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
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%.
VEU’s CAGR is 0.20 percentage points higher than that of EMB and as a result, would have yielded $788 less on a $10,000 investment. Thus, VEU outperformed EMB by 0.20% annually.
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