Vanguard FTSE Emerging Markets ETF (VWO) and iShares Core MSCI Emerging Markets ETF (IEMG) are two prominent exchange-traded funds (ETFs) offering investors exposure to emerging markets equities. While they share a similar investment focus, differences in their structures, holdings, and performances may influence an investor's choice between the two. Below is a detailed comparison:
1. Fund Overview
| Aspect | VWO | IEMG |
|---|---|---|
| Issuer | Vanguard | iShares (BlackRock) |
| Inception Date | March 4, 2005 | October 18, 2012 |
| Expense Ratio | 0.08% | 0.14% |
| Assets Under Management (AUM) | Approximately $83.1 billion | Approximately $83.3 billion |
| Underlying Index | FTSE Emerging Markets All Cap China A Inclusion Index | MSCI Emerging Markets Investable Market Index |
VWO has a lower expense ratio compared to IEMG.
2. Portfolio Composition
| Metric | VWO | IEMG |
|---|---|---|
| Number of Holdings | Approximately 4,832 | Approximately 2,758 |
| Top Holdings | Taiwan Semiconductor Manufacturing Co., Ltd. (9.16%)Tencent Holdings Ltd. (3.72%)Alibaba Group Holding Limited (2.38%) | Taiwan Semiconductor Manufacturing Co., Ltd. (8.14%)Tencent Holdings Ltd. (4.45%)Alibaba Group Holding Limited (3.01%) |
| Geographic Allocation | China (36.0%)Taiwan (19.0%)India (15.0%) | China (30.0%)Taiwan (15.0%)South Korea (14.0%) |
A notable distinction is that IEMG includes exposure to South Korea, whereas VWO does not.
3. Performance Metrics
| Time Period | VWO | IEMG |
|---|---|---|
| Year-to-Date (YTD) | 0.59% | 1.51% |
| 1 Year | 9.99% | 7.28% |
| 5 Years (Annualized) | 4.42% | 3.94% |
| 10 Years (Annualized) | 4.02% | 3.85% |
VWO has slightly outperformed IEMG over longer time horizons.
4. Dividend Yield
| Metric | VWO | IEMG |
|---|---|---|
| Dividend Yield (TTM) | 3.18% | 3.15% |
Both ETFs offer comparable trailing twelve-month dividend yields.
5. Risk Metrics
| Metric | VWO | IEMG |
|---|---|---|
| Standard Deviation | 14.82% | 15.02% |
| Sharpe Ratio | 0.79 | 0.58 |
| Max Drawdown | -67.68% | -38.71% |
VWO exhibits a higher Sharpe ratio, indicating better risk-adjusted returns, but also experienced a larger maximum drawdown historically.
6. Liquidity
| Metric | VWO | IEMG |
|---|---|---|
| Average Daily Volume | Approximately 7.5 million shares | Approximately 9.2 million shares |
IEMG has a higher average daily trading volume, suggesting greater liquidity.
Conclusion
Both VWO and IEMG provide broad exposure to emerging markets equities. VWO offers a lower expense ratio and has slightly outperformed IEMG over extended periods. However, IEMG includes South Korean companies, offering broader geographic diversification. Investors should consider these factors alongside their specific investment objectives and risk tolerance when choosing between these ETFs.