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BSV vs. IEF: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and IEF is a iShares Long Government fund. So, what’s the difference between BSV and IEF? And which fund is better?

The expense ratio of BSV is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%). BSV is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, BSV has provided lower returns than IEF over the past ten years.

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

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Summary

BSVIEF
NameVanguard Short-Term Bond Index Fund ETF SharesiShares 7-10 Year Treasury Bond ETF
CategoryShort-Term BondLong Government
IssuerVanguardiShares
AUM67.71B13.44B
Avg. Return2.27%5.06%
Div. Yield1.48%0.84%
Expense Ratio0.05%0.15%

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.

The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

BSV’s dividend yield is 0.64% higher than that of IEF (1.48% vs. 0.84%). Also, BSV yielded on average 2.79% less per year over the past decade (2.27% vs. 5.06%). The expense ratio of BSV is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%).

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Fund Composition

Holdings

BSV - Holdings

BSV Bond SectorsWeight
AAA71.65%
BBB13.08%
A11.95%
AA3.28%
Others0.03%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%

BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

IEF’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

BSVIEF
Mean Return0.160.32
R-squared78.3877.56
Std. Deviation1.335.42
Alpha0.21-1.2
Beta0.381.59
Sharpe Ratio0.980.6
Treynor Ratio3.331.97

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a R-squared of 78.38 with a Treynor Ratio of 3.33 and a Alpha of 0.21. Its Sharpe Ratio is 0.98 while BSV’s Beta is 0.38. Furthermore, the fund has a Mean Return of 0.16 and a Standard Deviation of 1.33.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Sharpe Ratio of 0.6 with a Standard Deviation of 5.42 and a Treynor Ratio of 1.97. Its Alpha is -1.2 while IEF’s Beta is 1.59. Furthermore, the fund has a Mean Return of 0.32 and a R-squared of 77.56.

BSV’s Mean Return is 0.16 points lower than that of IEF and its R-squared is 0.82 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than IEF. The Alpha and Beta of BSV are 1.41 points higher and 1.21 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

BSV vs. IEF - Annual Returns

YearBSVIEF
20204.67%9.84%
20194.92%8.38%
20181.34%0.82%
20171.2%2.47%
20161.42%1.0%
20150.92%1.55%
20141.32%8.92%
20130.17%-6.12%
20121.98%4.06%
20113.04%15.46%
20104.0%9.29%

BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% respectively.

The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

BSV vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BSV$10,000$12,7852.27%
IEF$10,000$16,9365.06%

A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.

BSV’s CAGR is 2.79 percentage points lower than that of IEF and as a result, would have yielded $4,151 less on a $10,000 investment. Thus, BSV performed worse than IEF by 2.79% annually.


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