IWR vs. VMBS: What’s The Difference?

The iShares Russell Mid-Cap ETF (IWR) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IWR is a iShares Mid-Cap Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IWR and VMBS? And which fund is better?

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

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

Summary

IWR VMBS
Name iShares Russell Mid-Cap ETF Vanguard Mortgage-Backed Securities Index Fund ETF Shares
Category Mid-Cap Blend Intermediate Government
Issuer iShares Vanguard
AUM 29.84B 16.61B
Avg. Return 14.15% 2.89%
Div. Yield 0.99% 1.23%
Expense Ratio 0.19% 0.05%

The iShares Russell Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.

IWR’s dividend yield is 0.24% lower than that of VMBS (0.99% vs. 1.23%). Also, IWR yielded on average 11.26% more per year over the past decade (14.15% vs. 2.89%). The expense ratio of IWR is 0.14 percentage points higher than VMBS’s (0.19% vs. 0.05%).

Fund Composition

Holdings

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

VMBS - Holdings

VMBS Bond Sectors Weight
AAA 100.01%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.01%

VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

IWR VMBS
Mean Return 1.17 0.21
R-squared 91.52 65.78
Std. Deviation 15.66 2.02
Alpha -2.8 0.37
Beta 1.11 0.54
Sharpe Ratio 0.86 0.94
Treynor Ratio 11.72 3.47

The iShares Russell Mid-Cap ETF (IWR) has a Treynor Ratio of 11.72 with a Sharpe Ratio of 0.86 and a Standard Deviation of 15.66. Its R-squared is 91.52 while IWR’s Alpha is -2.8. Furthermore, the fund has a Beta of 1.11 and a Mean Return of 1.17.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Alpha of 0.37 with a Treynor Ratio of 3.47 and a Mean Return of 0.21. Its R-squared is 65.78 while VMBS’s Beta is 0.54. Furthermore, the fund has a Sharpe Ratio of 0.94 and a Standard Deviation of 2.02.

IWR’s Mean Return is 0.96 points higher than that of VMBS and its R-squared is 25.74 points higher. With a Standard Deviation of 15.66, IWR is slightly more volatile than VMBS. The Alpha and Beta of IWR are 3.17 points lower and 0.57 points higher than VMBS’s Alpha and Beta.

Performance

Annual Returns

IWR vs. VMBS - Annual Returns

Year IWR VMBS
2020 16.91% 3.77%
2019 30.31% 6.17%
2018 -9.13% 0.87%
2017 18.32% 2.37%
2016 13.58% 1.43%
2015 -2.57% 1.43%
2014 13.03% 5.81%
2013 34.5% -1.28%
2012 17.13% 2.47%
2011 -1.67% 5.89%
2010 25.25% 5.24%

IWR had its best year in 2013 with an annual return of 34.5%. IWR’s worst year over the past decade yielded -9.13% and occurred in 2018. In most years the iShares Russell Mid-Cap ETF provided moderate returns such as in 2016, 2020, and 2012 where annual returns amounted to 13.58%, 16.91%, and 17.13% respectively.

The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.

Portfolio Growth

IWR vs. VMBS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWR $10,000 $31,737 14.15%
VMBS $10,000 $13,265 2.89%

A $10,000 investment in IWR would have resulted in a final balance of $31,737. This is a profit of $21,737 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.15%.

With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.

IWR’s CAGR is 11.26 percentage points higher than that of VMBS and as a result, would have yielded $18,472 more on a $10,000 investment. Thus, IWR outperformed VMBS by 11.26% annually.


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