AGG vs. BIV: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between AGG and BIV? And which fund is better?

The expense ratio of AGG is 0.01 percentage points lower than BIV’s (0.04% vs. 0.05%). AGG is mostly comprised of AAA bonds and BIV has a high exposure to AAA bond. Overall, AGG has provided lower returns than BIV over the past ten years.

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

Summary

AGG BIV
Name iShares Core U.S. Aggregate Bond ETF Vanguard Intermediate-Term Bond Index Fund ETF Shares
Category Intermediate-Term Bond Intermediate-Term Bond
Issuer iShares Vanguard
AUM 88.8B 39.05B
Avg. Return 4.04% 5.31%
Div. Yield 1.95% 2.06%
Expense Ratio 0.04% 0.05%

The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.

The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.

AGG’s dividend yield is 0.11% lower than that of BIV (1.95% vs. 2.06%). Also, AGG yielded on average 1.27% less per year over the past decade (4.04% vs. 5.31%). The expense ratio of AGG is 0.01 percentage points lower than BIV’s (0.04% vs. 0.05%).

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Fund Composition

Holdings

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.

BIV - Holdings

BIV Bond Sectors Weight
AAA 54.51%
BBB 25.24%
A 16.97%
AA 3.1%
Others 0.15%
Below B 0.03%
B 0.0%
BB 0.0%
US Government 0.0%

BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.

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Risk Analysis

AGG BIV
Mean Return 0.28 0.35
R-squared 99.96 95.12
Std. Deviation 3.03 4.09
Alpha -0.08 -0.07
Beta 1.01 1.33
Sharpe Ratio 0.9 0.89
Treynor Ratio 2.7 2.72

The iShares Core U.S. Aggregate Bond ETF (AGG) has a Sharpe Ratio of 0.9 with a Mean Return of 0.28 and a Alpha of -0.08. Its R-squared is 99.96 while AGG’s Beta is 1.01. Furthermore, the fund has a Treynor Ratio of 2.7 and a Standard Deviation of 3.03.

The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Standard Deviation of 4.09 with a Mean Return of 0.35 and a Sharpe Ratio of 0.89. Its Treynor Ratio is 2.72 while BIV’s Alpha is -0.07. Furthermore, the fund has a R-squared of 95.12 and a Beta of 1.33.

AGG’s Mean Return is 0.07 points lower than that of BIV and its R-squared is 4.84 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than BIV. The Alpha and Beta of AGG are 0.01 points lower and 0.32 points lower than BIV’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. BIV - Annual Returns

Year AGG BIV
2020 7.42% 9.71%
2019 8.68% 10.19%
2018 -0.05% -0.09%
2017 3.53% 3.8%
2016 2.56% 2.86%
2015 0.48% 1.23%
2014 6.04% 7.0%
2013 -2.15% -3.44%
2012 4.04% 7.02%
2011 7.58% 10.62%
2010 6.3% 9.55%

AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.

The year 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.

Portfolio Growth

AGG vs. BIV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
BIV $10,000 $17,492 5.31%

A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.

AGG’s CAGR is 1.27 percentage points lower than that of BIV and as a result, would have yielded $2,124 less on a $10,000 investment. Thus, AGG performed worse than BIV by 1.27% annually.


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