LQD vs. EFV: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between LQD and EFV? And which fund is better?

The expense ratio of LQD is 0.25 percentage points lower than EFV’s (0.14% vs. 0.39%). LQD is mostly comprised of BBB bonds while EFV has a high exposure to the financial services sector. Overall, LQD has provided higher returns than EFV over the past ten years.

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

Summary

LQD EFV
Name iShares iBoxx $ Investment Grade Corporate Bond ETF iShares MSCI EAFE Value ETF
Category Corporate Bond Foreign Large Value
Issuer iShares iShares
AUM 40.23B 14.37B
Avg. Return 6.58% 3.99%
Div. Yield 2.48% 2.94%
Expense Ratio 0.14% 0.39%

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.

The iShares MSCI EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.

LQD’s dividend yield is 0.46% lower than that of EFV (2.48% vs. 2.94%). Also, LQD yielded on average 2.58% more per year over the past decade (6.58% vs. 3.99%). The expense ratio of LQD is 0.25 percentage points lower than EFV’s (0.14% vs. 0.39%).

Fund Composition

Holdings

LQD - Holdings

LQD Bond Sectors Weight
BBB 50.92%
A 37.97%
AA 8.49%
AAA 2.7%
BB 0.05%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.13%

LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

EFV - Holdings

EFV Holdings Weight
Novartis AG 2.41%
Toyota Motor Corp 2.21%
Commonwealth Bank of Australia 1.59%
Siemens AG 1.45%
Sanofi SA 1.42%
HSBC Holdings PLC 1.4%
TotalEnergies SE 1.35%
Allianz SE 1.23%
GlaxoSmithKline PLC 1.18%
Rio Tinto PLC 1.1%

EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.

HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.

Risk Analysis

LQD EFV
Mean Return 0.47 0.42
R-squared 66.93 92.15
Std. Deviation 5.94 16.53
Alpha 0.52 -1.77
Beta 1.62 1.05
Sharpe Ratio 0.85 0.26
Treynor Ratio 3.08 2.92

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Treynor Ratio of 3.08 with a Sharpe Ratio of 0.85 and a Standard Deviation of 5.94. Its R-squared is 66.93 while LQD’s Mean Return is 0.47. Furthermore, the fund has a Beta of 1.62 and a Alpha of 0.52.

The iShares MSCI EAFE Value ETF (EFV) has a Sharpe Ratio of 0.26 with a Alpha of -1.77 and a Treynor Ratio of 2.92. Its R-squared is 92.15 while EFV’s Standard Deviation is 16.53. Furthermore, the fund has a Mean Return of 0.42 and a Beta of 1.05.

LQD’s Mean Return is 0.05 points higher than that of EFV and its R-squared is 25.22 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than EFV. The Alpha and Beta of LQD are 2.29 points higher and 0.57 points higher than EFV’s Alpha and Beta.

Performance

Annual Returns

LQD vs. EFV - Annual Returns

Year LQD EFV
2020 11.14% -2.78%
2019 17.13% 15.97%
2018 -3.76% -14.88%
2017 7.16% 21.22%
2016 5.97% 4.87%
2015 -1.08% -5.89%
2014 8.57% -5.65%
2013 -2.49% 22.61%
2012 11.68% 17.52%
2011 8.89% -12.24%
2010 9.15% 3.18%

LQD had its best year in 2019 with an annual return of 17.13%. LQD’s worst year over the past decade yielded -3.76% and occurred in 2018. In most years the iShares iBoxx $ Investment Grade Corporate Bond ETF provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 7.16%, 8.57%, and 8.89% respectively.

The year 2013 was the strongest year for EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.

Portfolio Growth

LQD vs. EFV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
EFV $10,000 $14,134 3.99%

A $10,000 investment in LQD would have resulted in a final balance of $19,776. This is a profit of $9,776 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.58%.

With a $10,000 investment in EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.

LQD’s CAGR is 2.58 percentage points higher than that of EFV and as a result, would have yielded $5,642 more on a $10,000 investment. Thus, LQD outperformed EFV by 2.58% annually.


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