AGG vs. TLT: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between AGG and TLT? And which fund is better?

The expense ratio of AGG is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%). AGG is mostly comprised of AAA bonds and TLT has a high exposure to AAA bond. Overall, AGG has provided lower returns than TLT over the past ten years.

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

Summary

AGG TLT
Name iShares Core U.S. Aggregate Bond ETF iShares 20+ Year Treasury Bond ETF
Category Intermediate-Term Bond Long Government
Issuer iShares iShares
AUM 88.8B 15.15B
Avg. Return 4.04% 9.00%
Div. Yield 1.95% 1.5%
Expense Ratio 0.04% 0.15%

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 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%.

AGG’s dividend yield is 0.45% higher than that of TLT (1.95% vs. 1.5%). Also, AGG yielded on average 4.96% less per year over the past decade (4.04% vs. 9.00%). The expense ratio of AGG is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%).

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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.

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

AGG TLT
Mean Return 0.28 0.63
R-squared 99.96 68.76
Std. Deviation 3.03 12.76
Alpha -0.08 -2.83
Beta 1.01 3.54
Sharpe Ratio 0.9 0.55
Treynor Ratio 2.7 1.82

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

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

AGG’s Mean Return is 0.35 points lower than that of TLT and its R-squared is 31.20 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than TLT. The Alpha and Beta of AGG are 2.75 points higher and 2.53 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. TLT - Annual Returns

Year AGG TLT
2020 7.42% 17.92%
2019 8.68% 14.93%
2018 -0.05% -2.07%
2017 3.53% 8.92%
2016 2.56% 1.36%
2015 0.48% -1.65%
2014 6.04% 27.35%
2013 -2.15% -13.91%
2012 4.04% 3.25%
2011 7.58% 33.6%
2010 6.3% 9.25%

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 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

AGG vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
TLT $10,000 $23,809 9.00%

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 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%.

AGG’s CAGR is 4.96 percentage points lower than that of TLT and as a result, would have yielded $8,441 less on a $10,000 investment. Thus, AGG performed worse than TLT by 4.96% annually.


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