AGG vs. IWN: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and IWN is a iShares Small Value fund. So, what’s the difference between AGG and IWN? And which fund is better?

The expense ratio of AGG is 0.20 percentage points lower than IWN’s (0.04% vs. 0.24%). AGG is mostly comprised of AAA bonds while IWN has a high exposure to the financial services sector. Overall, AGG has provided lower returns than IWN over the past ten years.

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

Summary

AGG IWN
Name iShares Core U.S. Aggregate Bond ETF iShares Russell 2000 Value ETF
Category Intermediate-Term Bond Small Value
Issuer iShares iShares
AUM 88.8B 15.48B
Avg. Return 4.04% 10.96%
Div. Yield 1.95% 1.26%
Expense Ratio 0.04% 0.24%

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 iShares Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

AGG’s dividend yield is 0.69% higher than that of IWN (1.95% vs. 1.26%). Also, AGG yielded on average 6.92% less per year over the past decade (4.04% vs. 10.96%). The expense ratio of AGG is 0.20 percentage points lower than IWN’s (0.04% vs. 0.24%).

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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.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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Risk Analysis

AGG IWN
Mean Return 0.28 1.01
R-squared 99.96 72.64
Std. Deviation 3.03 19.28
Alpha -0.08 -6.32
Beta 1.01 1.21
Sharpe Ratio 0.9 0.59
Treynor Ratio 2.7 8.3

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

The iShares Russell 2000 Value ETF (IWN) has a Alpha of -6.32 with a R-squared of 72.64 and a Mean Return of 1.01. Its Treynor Ratio is 8.3 while IWN’s Beta is 1.21. Furthermore, the fund has a Standard Deviation of 19.28 and a Sharpe Ratio of 0.59.

AGG’s Mean Return is 0.73 points lower than that of IWN and its R-squared is 27.32 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than IWN. The Alpha and Beta of AGG are 6.24 points higher and 0.20 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. IWN - Annual Returns

Year AGG IWN
2020 7.42% 4.5%
2019 8.68% 22.17%
2018 -0.05% -12.94%
2017 3.53% 7.73%
2016 2.56% 31.64%
2015 0.48% -7.53%
2014 6.04% 4.13%
2013 -2.15% 34.3%
2012 4.04% 17.92%
2011 7.58% -5.64%
2010 6.3% 24.29%

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 2013 was the strongest year for IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

AGG vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
IWN $10,000 $28,189 10.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

AGG’s CAGR is 6.92 percentage points lower than that of IWN and as a result, would have yielded $12,821 less on a $10,000 investment. Thus, AGG performed worse than IWN by 6.92% annually.


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