ACWI vs. TLT: What’s The Difference?

The iShares MSCI ACWI ETF (ACWI) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. ACWI is a iShares N/A fund and TLT is a iShares Long Government fund. So, what’s the difference between ACWI and TLT? And which fund is better?

The expense ratio of ACWI is 0.17 percentage points higher than TLT’s (0.32% vs. 0.15%). ACWI also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, ACWI has provided higher returns than TLT over the past 11 years.

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

Summary

ACWI TLT
Name iShares MSCI ACWI ETF iShares 20+ Year Treasury Bond ETF
Category N/A Long Government
Issuer iShares iShares
AUM 16.85B 15.15B
Avg. Return 10.21% 9.00%
Div. Yield 1.39% 1.5%
Expense Ratio 0.32% 0.15%

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

The iShares 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

ACWI’s dividend yield is 0.11% lower than that of TLT (1.39% vs. 1.5%). Also, ACWI yielded on average 1.22% more per year over the past decade (10.21% vs. 9.00%). The expense ratio of ACWI is 0.17 percentage points higher than TLT’s (0.32% vs. 0.15%).

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Fund Composition

Holdings

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

TLT - Holdings

TLT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

ACWI TLT
Mean Return 0.89 0.63
R-squared 99.96 68.76
Std. Deviation 14.05 12.76
Alpha 0.15 -2.83
Beta 1 3.54
Sharpe Ratio 0.71 0.55
Treynor Ratio 9.45 1.82

The iShares MSCI ACWI ETF (ACWI) has a Standard Deviation of 14.05 with a Mean Return of 0.89 and a Sharpe Ratio of 0.71. Its Alpha is 0.15 while ACWI’s Beta is 1. Furthermore, the fund has a R-squared of 99.96 and a Treynor Ratio of 9.45.

The iShares 20+ Year Treasury Bond ETF (TLT) has a Alpha of -2.83 with a Standard Deviation of 12.76 and a Beta of 3.54. Its R-squared is 68.76 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a Treynor Ratio of 1.82 and a Mean Return of 0.63.

ACWI’s Mean Return is 0.26 points higher than that of TLT and its R-squared is 31.20 points higher. With a Standard Deviation of 14.05, ACWI is slightly more volatile than TLT. The Alpha and Beta of ACWI are 2.98 points higher and 2.54 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

ACWI vs. TLT - Annual Returns

Year ACWI TLT
2020 16.38% 17.92%
2019 26.7% 14.93%
2018 -9.15% -2.07%
2017 24.35% 8.92%
2016 8.22% 1.36%
2015 -2.39% -1.65%
2014 4.64% 27.35%
2013 22.91% -13.91%
2012 15.99% 3.25%
2011 -7.6% 33.6%
2010 12.31% 9.25%

ACWI had its best year in 2019 with an annual return of 26.7%. ACWI’s worst year over the past decade yielded -9.15% and occurred in 2018. In most years the iShares MSCI ACWI ETF provided moderate returns such as in 2016, 2010, and 2012 where annual returns amounted to 8.22%, 12.31%, and 15.99% respectively.

The year 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

ACWI vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ACWI $10,000 $27,241 10.21%
TLT $10,000 $23,809 9.00%

A $10,000 investment in ACWI would have resulted in a final balance of $27,241. This is a profit of $17,241 over 11 years and amounts to a compound annual growth rate (CAGR) of 10.21%.

With a $10,000 investment in TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

ACWI’s CAGR is 1.22 percentage points higher than that of TLT and as a result, would have yielded $3,432 more on a $10,000 investment. Thus, ACWI outperformed TLT by 1.22% annually.


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