The Vanguard FTSE Europe Index Fund ETF Shares (VGK) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VGK is a Vanguard Europe Stock fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VGK and EMB? And which fund is better?
The expense ratio of VGK is 0.31 percentage points lower than EMB’s (0.08% vs. 0.39%). VGK also has a high exposure to the financial services sector while EMB is mostly comprised of BBB bonds. Overall, VGK has provided higher returns than EMB over the past 11 years.
In this article, we’ll compare VGK vs. EMB. We’ll look at portfolio growth and risk metrics, as well as at their performance and fund composition. Moreover, I’ll also discuss VGK’s and EMB’s annual returns, industry exposure, and holdings and examine how these affect their overall returns.
Summary
| VGK | EMB | |
| Name | Vanguard FTSE Europe Index Fund ETF Shares | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Europe Stock | Emerging Markets Bond |
| Issuer | Vanguard | iShares |
| AUM | 25.7B | 19.76B |
| Avg. Return | 6.68% | 6.43% |
| Div. Yield | 2.52% | 3.85% |
| Expense Ratio | 0.08% | 0.39% |
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% 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%.
VGK’s dividend yield is 1.33% lower than that of EMB (2.52% vs. 3.85%). Also, VGK yielded on average 0.24% more per year over the past decade (6.68% vs. 6.43%). The expense ratio of VGK is 0.31 percentage points lower than EMB’s (0.08% vs. 0.39%).
Fund Composition
Holdings
| VGK Holdings | Weight |
| Nestle SA | 2.82% |
| ASML Holding NV | 2.2% |
| Roche Holding AG | 2.13% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.58% |
| Novartis AG | 1.55% |
| AstraZeneca PLC | 1.27% |
| SAP SE | 1.25% |
| Unilever PLC | 1.23% |
| Novo Nordisk A/S B | 1.09% |
| Siemens AG | 0.96% |
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
| 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
| VGK | EMB | |
| Mean Return | 0.61 | 0.44 |
| R-squared | 92.76 | 23.34 |
| Std. Deviation | 16.65 | 8.44 |
| Alpha | 0.45 | 0.89 |
| Beta | 1.06 | 1.36 |
| Sharpe Ratio | 0.4 | 0.55 |
| Treynor Ratio | 5.12 | 3.24 |
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Mean Return of 0.61 with a Beta of 1.06 and a Treynor Ratio of 5.12. Its Alpha is 0.45 while VGK’s R-squared is 92.76. Furthermore, the fund has a Standard Deviation of 16.65 and a Sharpe Ratio of 0.4.
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 Alpha of 0.89. Its R-squared is 23.34 while EMB’s Sharpe Ratio is 0.55. Furthermore, the fund has a Beta of 1.36 and a Mean Return of 0.44.
VGK’s Mean Return is 0.17 points higher than that of EMB and its R-squared is 69.42 points higher. With a Standard Deviation of 16.65, VGK is slightly more volatile than EMB. The Alpha and Beta of VGK are 0.44 points lower and 0.30 points lower than EMB’s Alpha and Beta.
Performance
Annual Returns
| Year | VGK | EMB |
| 2020 | 6.5% | 5.48% |
| 2019 | 24.26% | 15.57% |
| 2018 | -14.79% | -5.67% |
| 2017 | 27.06% | 9.98% |
| 2016 | -0.59% | 9.41% |
| 2015 | -1.87% | 0.43% |
| 2014 | -6.56% | 6.69% |
| 2013 | 24.93% | -7.42% |
| 2012 | 21.01% | 17.64% |
| 2011 | -11.49% | 7.2% |
| 2010 | 5.01% | 11.47% |
VGK had its best year in 2017 with an annual return of 27.06%. VGK’s worst year over the past decade yielded -14.79% and occurred in 2018. In most years the Vanguard FTSE Europe Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to -0.59%, 5.01%, and 6.5% 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 |
| VGK | $10,000 | $18,350 | 6.68% |
| EMB | $10,000 | $19,295 | 6.43% |
A $10,000 investment in VGK would have resulted in a final balance of $18,350. This is a profit of $8,350 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.68%.
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%.
VGK’s CAGR is 0.24 percentage points higher than that of EMB and as a result, would have yielded $945 less on a $10,000 investment. Thus, VGK outperformed EMB by 0.24% annually.
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