IUSB vs. IEF: What’s The Difference?

The iShares Core Total USD Bond Market ETF (IUSB) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. IUSB is a iShares N/A fund and IEF is a iShares Long Government fund. So, what’s the difference between IUSB and IEF? And which fund is better?

The expense ratio of IUSB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%). IUSB is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, IUSB has provided lower returns than IEF over the past 6 years.

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

Summary

IUSB IEF
Name iShares Core Total USD Bond Market ETF iShares 7-10 Year Treasury Bond ETF
Category N/A Long Government
Issuer iShares iShares
AUM 14.49B 13.44B
Avg. Return 4.13% 5.06%
Div. Yield 2.1% 0.84%
Expense Ratio 0.06% 0.15%

The iShares Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% 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%.

IUSB’s dividend yield is 1.26% higher than that of IEF (2.1% vs. 0.84%). Also, IUSB yielded on average 0.93% less per year over the past decade (4.13% vs. 5.06%). The expense ratio of IUSB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%).

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Fund Composition

Holdings

IUSB - Holdings

IUSB Bond Sectors Weight
AAA 58.32%
BBB 16.98%
A 12.27%
BB 4.33%
AA 3.36%
B 2.8%
Others 1.01%
Below B 0.92%
US Government 0.0%

IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.

IEF - Holdings

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.

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Risk Analysis

IUSB IEF
Mean Return 0 0.32
R-squared 0 77.56
Std. Deviation 0 5.42
Alpha 0 -1.2
Beta 0 1.59
Sharpe Ratio 0 0.6
Treynor Ratio 0 1.97

The iShares Core Total USD Bond Market ETF (IUSB) has a Treynor Ratio of 0 with a Mean Return of 0 and a Standard Deviation of 0. Its Beta is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Sharpe Ratio of 0.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Alpha of -1.2 and a R-squared of 77.56. Its Sharpe Ratio is 0.6 while IEF’s Mean Return is 0.32. Furthermore, the fund has a Standard Deviation of 5.42 and a Beta of 1.59.

IUSB’s Mean Return is 0.32 points lower than that of IEF and its R-squared is 77.56 points lower. With a Standard Deviation of 0, IUSB is slightly less volatile than IEF. The Alpha and Beta of IUSB are 1.20 points higher and 1.59 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

IUSB vs. IEF - Annual Returns

Year IUSB IEF
2020 7.59% 9.84%
2019 9.26% 8.38%
2018 -0.38% 0.82%
2017 4.06% 2.47%
2016 3.78% 1.0%
2015 0.46% 1.55%
2014 0.0% 8.92%
2013 0.0% -6.12%
2012 0.0% 4.06%
2011 0.0% 15.46%
2010 0.0% 9.29%

IUSB had its best year in 2019 with an annual return of 9.26%. IUSB’s worst year over the past decade yielded -0.38% and occurred in 2018. In most years the iShares Core Total USD Bond Market ETF provided moderate returns such as in 2011, 2010, and 2015 where annual returns amounted to 0.0%, 0.0%, and 0.46% 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

IUSB vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IUSB $10,000 $12,704 4.13%
IEF $10,000 $12,614 5.06%

A $10,000 investment in IUSB would have resulted in a final balance of $12,704. This is a profit of $2,704 over 6 years and amounts to a compound annual growth rate (CAGR) of 4.13%.

With a $10,000 investment in IEF, the end total would have been $12,614. This equates to a $2,614 profit over 6 years and a compound annual growth rate (CAGR) of 5.06%.

IUSB’s CAGR is 0.93 percentage points lower than that of IEF and as a result, would have yielded $90 more on a $10,000 investment. Thus, IUSB performed worse than IEF by 0.93% annually.


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