The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IGSB and QUAL? And which fund is better?
The expense ratio of IGSB is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%). IGSB is mostly comprised of BBB bonds while QUAL has a high exposure to the technology sector. Overall, IGSB has provided lower returns than QUAL over the past 7 years.
In this article, we’ll compare IGSB vs. QUAL. We’ll look at fund composition and portfolio growth, as well as at their performance and holdings. Moreover, I’ll also discuss IGSB’s and QUAL’s risk metrics, industry exposure, and annual returns and examine how these affect their overall returns.
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Summary
| IGSB | QUAL | |
| Name | iShares 1-5 Year Investment Grade Corporate Bond ETF | iShares MSCI USA Quality Factor ETF |
| Category | Short-Term Bond | Large Blend |
| Issuer | iShares | iShares |
| AUM | 26.63B | 23.93B |
| Avg. Return | 2.51% | 13.42% |
| Div. Yield | 2.02% | 1.29% |
| 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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
IGSB’s dividend yield is 0.73% higher than that of QUAL (2.02% vs. 1.29%). Also, IGSB yielded on average 10.92% less per year over the past decade (2.51% vs. 13.42%). The expense ratio of IGSB is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%).
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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.
| QUAL Holdings | Weight |
| Facebook Inc Class A | 4.77% |
| Nike Inc Class B | 4.05% |
| Microsoft Corp | 3.54% |
| Apple Inc | 3.52% |
| Johnson & Johnson | 2.99% |
| BlackRock Inc | 2.87% |
| Target Corp | 2.8% |
| Mastercard Inc Class A | 2.72% |
| NVIDIA Corp | 2.71% |
| Alphabet Inc Class A | 2.49% |
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
Risk Analysis
| IGSB | QUAL | |
| Mean Return | 0.19 | 0 |
| R-squared | 26.13 | 0 |
| Std. Deviation | 2 | 0 |
| Alpha | 0.69 | 0 |
| Beta | 0.34 | 0 |
| Sharpe Ratio | 0.82 | 0 |
| Treynor Ratio | 4.82 | 0 |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a Sharpe Ratio of 0.82 and a R-squared of 26.13. Its Beta is 0.34 while IGSB’s Alpha is 0.69. Furthermore, the fund has a Standard Deviation of 2 and a Treynor Ratio of 4.82.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Beta of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while QUAL’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.
IGSB’s Mean Return is 0.19 points higher than that of QUAL and its R-squared is 26.13 points higher. With a Standard Deviation of 2, IGSB is slightly more volatile than QUAL. The Alpha and Beta of IGSB are 0.69 points higher and 0.34 points higher than QUAL’s Alpha and Beta.
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Performance
Annual Returns
| Year | IGSB | QUAL |
| 2020 | 5.26% | 16.96% |
| 2019 | 7.01% | 34.14% |
| 2018 | 1.34% | -5.77% |
| 2017 | 1.41% | 22.26% |
| 2016 | 1.77% | 9.18% |
| 2015 | 0.7% | 5.56% |
| 2014 | 0.74% | 11.62% |
| 2013 | 1.03% | 0.0% |
| 2012 | 3.28% | 0.0% |
| 2011 | 1.34% | 0.0% |
| 2010 | 3.69% | 0.0% |
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 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IGSB | $10,000 | $11,950 | 2.51% |
| QUAL | $10,000 | $23,251 | 13.42% |
A $10,000 investment in IGSB would have resulted in a final balance of $11,950. This is a profit of $1,950 over 7 years and amounts to a compound annual growth rate (CAGR) of 2.51%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
IGSB’s CAGR is 10.92 percentage points lower than that of QUAL and as a result, would have yielded $11,301 less on a $10,000 investment. Thus, IGSB performed worse than QUAL by 10.92% annually.
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