The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IUSB is a iShares N/A fund. So, what’s the difference between LQD and IUSB? And which fund is better?
The expense ratio of LQD is 0.08 percentage points higher than IUSB’s (0.14% vs. 0.06%). LQD is mostly comprised of BBB bonds and IUSB has a high exposure to AAA bond. Overall, LQD has provided higher returns than IUSB over the past ten years.
In this article, we’ll compare LQD vs. IUSB. We’ll look at risk metrics and performance, as well as at their industry exposure and holdings. Moreover, I’ll also discuss LQD’s and IUSB’s portfolio growth, annual returns, and fund composition and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares Core Total USD Bond Market ETF|
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 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%.
LQD’s dividend yield is 0.38% higher than that of IUSB (2.48% vs. 2.1%). Also, LQD yielded on average 2.45% more per year over the past decade (6.58% vs. 4.13%). The expense ratio of LQD is 0.08 percentage points higher than IUSB’s (0.14% vs. 0.06%).
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|LQD Bond Sectors||Weight|
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.
|IUSB Bond Sectors||Weight|
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.
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The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Treynor Ratio of 3.08 with a R-squared of 66.93 and a Standard Deviation of 5.94. Its Beta is 1.62 while LQD’s Sharpe Ratio is 0.85. Furthermore, the fund has a Mean Return of 0.47 and a Alpha of 0.52.
The iShares Core Total USD Bond Market ETF (IUSB) has a Alpha of 0 with a Beta of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Mean Return of 0 and a Sharpe Ratio of 0.
LQD’s Mean Return is 0.47 points higher than that of IUSB and its R-squared is 66.93 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than IUSB. The Alpha and Beta of LQD are 0.52 points higher and 1.62 points higher than IUSB’s Alpha and Beta.
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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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $14,073. This is a profit of $4,073 over 6 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.
LQD’s CAGR is 2.45 percentage points higher than that of IUSB and as a result, would have yielded $1,369 more on a $10,000 investment. Thus, LQD outperformed IUSB by 2.45% annually.
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