AGG vs. VLUE: What’s The Difference?

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

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

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

Summary

AGG VLUE
Name iShares Core U.S. Aggregate Bond ETF iShares MSCI USA Value Factor ETF
Category Intermediate-Term Bond Large Value
Issuer iShares iShares
AUM 88.8B 15.95B
Avg. Return 4.04% 8.91%
Div. Yield 1.95% 1.89%
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 MSCI USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

AGG’s dividend yield is 0.06% higher than that of VLUE (1.95% vs. 1.89%). Also, AGG yielded on average 4.87% less per year over the past decade (4.04% vs. 8.91%). The expense ratio of AGG is 0.11 percentage points lower than VLUE’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.

VLUE - Holdings

VLUE Holdings Weight
AT&T Inc 7.13%
Intel Corp 6.14%
General Motors Co 3.19%
Micron Technology Inc 3.14%
Cisco Systems Inc 3.05%
International Business Machines Corp 2.76%
Target Corp 2.38%
Citigroup Inc 2.32%
Ford Motor Co 2.23%
Pfizer Inc 2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

AGG VLUE
Mean Return 0.28 0
R-squared 99.96 0
Std. Deviation 3.03 0
Alpha -0.08 0
Beta 1.01 0
Sharpe Ratio 0.9 0
Treynor Ratio 2.7 0

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

The iShares MSCI USA Value Factor ETF (VLUE) has a Treynor Ratio of 0 with a Mean Return of 0 and a Standard Deviation of 0. Its Alpha is 0 while VLUE’s Beta is 0. Furthermore, the fund has a R-squared of 0 and a Sharpe Ratio of 0.

AGG’s Mean Return is 0.28 points higher than that of VLUE and its R-squared is 99.96 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than VLUE. The Alpha and Beta of AGG are 0.08 points lower and 1.01 points higher than VLUE’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. VLUE - Annual Returns

Year AGG VLUE
2020 7.42% -0.32%
2019 8.68% 27.47%
2018 -0.05% -11.18%
2017 3.53% 21.97%
2016 2.56% 15.68%
2015 0.48% -3.54%
2014 6.04% 12.29%
2013 -2.15% 0.0%
2012 4.04% 0.0%
2011 7.58% 0.0%
2010 6.3% 0.0%

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 2019 was the strongest year for VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

AGG vs. VLUE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $13,201 4.04%
VLUE $10,000 $17,247 8.91%

A $10,000 investment in AGG would have resulted in a final balance of $13,201. This is a profit of $3,201 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

AGG’s CAGR is 4.87 percentage points lower than that of VLUE and as a result, would have yielded $4,046 less on a $10,000 investment. Thus, AGG performed worse than VLUE by 4.87% annually.


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