The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between IGSB and VGK? And which fund is better?
The expense ratio of IGSB is 0.02 percentage points lower than VGK’s (0.06% vs. 0.08%). IGSB is mostly comprised of BBB bonds while VGK has a high exposure to the financial services sector. Overall, IGSB has provided lower returns than VGK over the past 11 years.
In this article, we’ll compare IGSB vs. VGK. We’ll look at risk metrics and holdings, as well as at their performance and annual returns. Moreover, I’ll also discuss IGSB’s and VGK’s industry exposure, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| IGSB | VGK | |
| Name | iShares 1-5 Year Investment Grade Corporate Bond ETF | Vanguard FTSE Europe Index Fund ETF Shares |
| Category | Short-Term Bond | Europe Stock |
| Issuer | iShares | Vanguard |
| AUM | 26.63B | 25.7B |
| Avg. Return | 2.51% | 6.68% |
| Div. Yield | 2.02% | 2.52% |
| Expense Ratio | 0.06% | 0.08% |
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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
IGSB’s dividend yield is 0.50% lower than that of VGK (2.02% vs. 2.52%). Also, IGSB yielded on average 4.17% less per year over the past decade (2.51% vs. 6.68%). The expense ratio of IGSB is 0.02 percentage points lower than VGK’s (0.06% vs. 0.08%).
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.
| VGK Holdings | Weight |
| Nestle SA | 2.82% |
| ASML Holding NV | 2.2% |
| Roche Holding AG | 2.13% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.58% |
| Novartis AG | 1.55% |
| AstraZeneca PLC | 1.27% |
| SAP SE | 1.25% |
| Unilever PLC | 1.23% |
| Novo Nordisk A/S B | 1.09% |
| Siemens AG | 0.96% |
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
Risk Analysis
| IGSB | VGK | |
| Mean Return | 0.19 | 0.61 |
| R-squared | 26.13 | 92.76 |
| Std. Deviation | 2 | 16.65 |
| Alpha | 0.69 | 0.45 |
| Beta | 0.34 | 1.06 |
| Sharpe Ratio | 0.82 | 0.4 |
| Treynor Ratio | 4.82 | 5.12 |
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a R-squared of 26.13 and a Standard Deviation of 2. Its Treynor Ratio is 4.82 while IGSB’s Beta is 0.34. Furthermore, the fund has a Sharpe Ratio of 0.82 and a Alpha of 0.69.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Beta of 1.06 with a Mean Return of 0.61 and a Standard Deviation of 16.65. Its R-squared is 92.76 while VGK’s Treynor Ratio is 5.12. Furthermore, the fund has a Alpha of 0.45 and a Sharpe Ratio of 0.4.
IGSB’s Mean Return is 0.42 points lower than that of VGK and its R-squared is 66.63 points lower. With a Standard Deviation of 2, IGSB is slightly less volatile than VGK. The Alpha and Beta of IGSB are 0.24 points higher and 0.72 points lower than VGK’s Alpha and Beta.
Performance
Annual Returns
| Year | IGSB | VGK |
| 2020 | 5.26% | 6.5% |
| 2019 | 7.01% | 24.26% |
| 2018 | 1.34% | -14.79% |
| 2017 | 1.41% | 27.06% |
| 2016 | 1.77% | -0.59% |
| 2015 | 0.7% | -1.87% |
| 2014 | 0.74% | -6.56% |
| 2013 | 1.03% | 24.93% |
| 2012 | 3.28% | 21.01% |
| 2011 | 1.34% | -11.49% |
| 2010 | 3.69% | 5.01% |
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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IGSB | $10,000 | $13,103 | 2.51% |
| VGK | $10,000 | $18,350 | 6.68% |
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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.
IGSB’s CAGR is 4.17 percentage points lower than that of VGK and as a result, would have yielded $5,247 less on a $10,000 investment. Thus, IGSB performed worse than VGK by 4.17% annually.
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