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GOVT vs. DFAC: What’s The Difference?

The iShares U.S. Treasury Bond ETF (GOVT) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. GOVT is a iShares Intermediate Government fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between GOVT and DFAC? And which fund is better?

The expense ratio of GOVT is 0.14 percentage points lower than DFAC’s (0.05% vs. 0.19%). GOVT is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, GOVT has provided lower returns than DFAC over the past 8 years.

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

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Summary

GOVTDFAC
NameiShares U.S. Treasury Bond ETFDimensional U.S. Core Equity 2 ETF
CategoryIntermediate GovernmentLarge Blend
IssueriSharesDimensional Fund Advisors
AUM17.07B13.53B
Avg. Return2.67%13.93%
Div. Yield1.0%1.0%
Expense Ratio0.05%0.19%

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

GOVT’s dividend yield is 0.00% lower than that of DFAC (1.0% vs. 1.0%). Also, GOVT yielded on average 11.26% less per year over the past decade (2.67% vs. 13.93%). The expense ratio of GOVT is 0.14 percentage points lower than DFAC’s (0.05% vs. 0.19%).

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Fund Composition

Holdings

GOVT - Holdings

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

GOVT’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.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

GOVTDFAC
Mean Return01.19
R-squared095.1
Std. Deviation015.55
Alpha0-2.75
Beta01.12
Sharpe Ratio00.88
Treynor Ratio011.85

The iShares U.S. Treasury Bond ETF (GOVT) has a Sharpe Ratio of 0 with a Beta of 0 and a Mean Return of 0. Its Standard Deviation is 0 while GOVT’s Treynor Ratio is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a R-squared of 95.1 with a Alpha of -2.75 and a Standard Deviation of 15.55. Its Beta is 1.12 while DFAC’s Sharpe Ratio is 0.88. Furthermore, the fund has a Treynor Ratio of 11.85 and a Mean Return of 1.19.

GOVT’s Mean Return is 1.19 points lower than that of DFAC and its R-squared is 95.10 points lower. With a Standard Deviation of 0, GOVT is slightly less volatile than DFAC. The Alpha and Beta of GOVT are 2.75 points higher and 1.12 points lower than DFAC’s Alpha and Beta.

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Performance

Annual Returns

GOVT vs. DFAC - Annual Returns

YearGOVTDFAC
20207.92%15.8%
20196.71%29.54%
20180.74%-9.43%
20172.19%18.82%
20160.92%16.31%
20150.76%-2.53%
20144.99%9.56%
2013-2.84%37.55%
20120.0%17.93%
20110.0%-1.96%
20100.0%21.67%

GOVT had its best year in 2020 with an annual return of 7.92%. GOVT’s worst year over the past decade yielded -2.84% and occurred in 2013. In most years the iShares U.S. Treasury Bond ETF provided moderate returns such as in 2018, 2015, and 2016 where annual returns amounted to 0.74%, 0.76%, and 0.92% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

GOVT vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
GOVT$10,000$12,2972.67%
DFAC$10,000$27,57913.93%

A $10,000 investment in GOVT would have resulted in a final balance of $12,297. This is a profit of $2,297 over 8 years and amounts to a compound annual growth rate (CAGR) of 2.67%.

With a $10,000 investment in DFAC, the end total would have been $27,579. This equates to a $17,579 profit over 8 years and a compound annual growth rate (CAGR) of 13.93%.

GOVT’s CAGR is 11.26 percentage points lower than that of DFAC and as a result, would have yielded $15,282 less on a $10,000 investment. Thus, GOVT performed worse than DFAC by 11.26% annually.


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