The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and IEF is a iShares Long Government fund. So, what’s the difference between IGSB and IEF? And which fund is better?
The expense ratio of IGSB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%). IGSB is mostly comprised of BBB bonds and IEF has a high exposure to AAA bond. Overall, IGSB has provided lower returns than IEF over the past 11 years.
In this article, we’ll compare IGSB vs. IEF. We’ll look at risk metrics and portfolio growth, as well as at their annual returns and fund composition. Moreover, I’ll also discuss IGSB’s and IEF’s performance, holdings, and industry exposure and examine how these affect their overall returns.
Summary
| IGSB | IEF | |
| Name | iShares 1-5 Year Investment Grade Corporate Bond ETF | iShares 7-10 Year Treasury Bond ETF |
| Category | Short-Term Bond | Long Government |
| Issuer | iShares | iShares |
| AUM | 26.63B | 13.44B |
| Avg. Return | 2.51% | 5.06% |
| Div. Yield | 2.02% | 0.84% |
| Expense Ratio | 0.06% | 0.15% |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
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%.
IGSB’s dividend yield is 1.18% higher than that of IEF (2.02% vs. 0.84%). Also, IGSB yielded on average 2.55% less per year over the past decade (2.51% vs. 5.06%). The expense ratio of IGSB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%).
Fund Composition
Holdings
| IGSB Bond Sectors | Weight |
| BBB | 50.48% |
| A | 40.04% |
| AA | 7.46% |
| AAA | 2.21% |
| BB | 0.09% |
| Below B | 0.0% |
| B | 0.0% |
| US Government | 0.0% |
| Others | -0.28% |
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
| IEF 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% |
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.
Risk Analysis
| IGSB | IEF | |
| Mean Return | 0.19 | 0.32 |
| R-squared | 26.13 | 77.56 |
| Std. Deviation | 2 | 5.42 |
| Alpha | 0.69 | -1.2 |
| Beta | 0.34 | 1.59 |
| Sharpe Ratio | 0.82 | 0.6 |
| Treynor Ratio | 4.82 | 1.97 |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a R-squared of 26.13 with a Mean Return of 0.19 and a Standard Deviation of 2. Its Beta is 0.34 while IGSB’s Sharpe Ratio is 0.82. Furthermore, the fund has a Alpha of 0.69 and a Treynor Ratio of 4.82.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a Sharpe Ratio of 0.6 and a Mean Return of 0.32. Its Treynor Ratio is 1.97 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Alpha of -1.2 and a R-squared of 77.56.
IGSB’s Mean Return is 0.13 points lower than that of IEF and its R-squared is 51.43 points lower. With a Standard Deviation of 2, IGSB is slightly less volatile than IEF. The Alpha and Beta of IGSB are 1.89 points higher and 1.25 points lower than IEF’s Alpha and Beta.
Performance
Annual Returns
| Year | IGSB | IEF |
| 2020 | 5.26% | 9.84% |
| 2019 | 7.01% | 8.38% |
| 2018 | 1.34% | 0.82% |
| 2017 | 1.41% | 2.47% |
| 2016 | 1.77% | 1.0% |
| 2015 | 0.7% | 1.55% |
| 2014 | 0.74% | 8.92% |
| 2013 | 1.03% | -6.12% |
| 2012 | 3.28% | 4.06% |
| 2011 | 1.34% | 15.46% |
| 2010 | 3.69% | 9.29% |
IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% 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
| Fund | Initial Balance | Final Balance | CAGR |
| IGSB | $10,000 | $13,103 | 2.51% |
| IEF | $10,000 | $16,936 | 5.06% |
A $10,000 investment in IGSB would have resulted in a final balance of $13,103. This is a profit of $3,103 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.51%.
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%.
IGSB’s CAGR is 2.55 percentage points lower than that of IEF and as a result, would have yielded $3,833 less on a $10,000 investment. Thus, IGSB performed worse than IEF by 2.55% annually.
