BSV vs. MBB: What’s The Difference?

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

The expense ratio of BSV is 0.01 percentage points lower than MBB’s (0.05% vs. 0.06%). BSV is mostly comprised of AAA bonds and MBB has a high exposure to AAA bond. Overall, BSV has provided lower returns than MBB over the past ten years.

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

Summary

BSV MBB
Name Vanguard Short-Term Bond Index Fund ETF Shares iShares MBS ETF
Category Short-Term Bond Intermediate Government
Issuer Vanguard iShares
AUM 67.71B 25.69B
Avg. Return 2.27% 3.08%
Div. Yield 1.48% 1.88%
Expense Ratio 0.05% 0.06%

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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

BSV’s dividend yield is 0.40% lower than that of MBB (1.48% vs. 1.88%). Also, BSV yielded on average 0.80% less per year over the past decade (2.27% vs. 3.08%). The expense ratio of BSV is 0.01 percentage points lower than MBB’s (0.05% vs. 0.06%).

Fund Composition

Holdings

BSV - Holdings

BSV Bond Sectors Weight
AAA 71.65%
BBB 13.08%
A 11.95%
AA 3.28%
Others 0.03%
Below B 0.01%
B 0.0%
BB 0.0%
US Government 0.0%

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.

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.

Risk Analysis

BSV MBB
Mean Return 0.16 0.2
R-squared 78.38 74.38
Std. Deviation 1.33 2.12
Alpha 0.21 0.14
Beta 0.38 0.6
Sharpe Ratio 0.98 0.87
Treynor Ratio 3.33 3.02

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

The iShares MBS ETF (MBB) has a Beta of 0.6 with a Mean Return of 0.2 and a R-squared of 74.38. Its Standard Deviation is 2.12 while MBB’s Treynor Ratio is 3.02. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Alpha of 0.14.

BSV’s Mean Return is 0.04 points lower than that of MBB and its R-squared is 4.00 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than MBB. The Alpha and Beta of BSV are 0.07 points higher and 0.22 points lower than MBB’s Alpha and Beta.

Performance

Annual Returns

BSV vs. MBB - Annual Returns

Year BSV MBB
2020 4.67% 4.03%
2019 4.92% 6.27%
2018 1.34% 0.81%
2017 1.2% 2.37%
2016 1.42% 1.28%
2015 0.92% 1.28%
2014 1.32% 6.16%
2013 0.17% -1.92%
2012 1.98% 2.23%
2011 3.04% 5.88%
2010 4.0% 5.44%

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 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

BSV vs. MBB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
BSV $10,000 $12,785 2.27%
MBB $10,000 $13,906 3.08%

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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

BSV’s CAGR is 0.80 percentage points lower than that of MBB and as a result, would have yielded $1,121 less on a $10,000 investment. Thus, BSV performed worse than MBB by 0.80% annually.


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