LQD vs. IVE: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares S&P 500 Value ETF (IVE) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IVE is a iShares Large Value fund. So, what’s the difference between LQD and IVE? And which fund is better?

The expense ratio of LQD is 0.04 percentage points lower than IVE’s (0.14% vs. 0.18%). LQD is mostly comprised of BBB bonds while IVE has a high exposure to the financial services sector. Overall, LQD has provided lower returns than IVE over the past ten years.

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

Summary

LQD IVE
Name iShares iBoxx $ Investment Grade Corporate Bond ETF iShares S&P 500 Value ETF
Category Corporate Bond Large Value
Issuer iShares iShares
AUM 40.23B 22.4B
Avg. Return 6.58% 11.68%
Div. Yield 2.48% 1.88%
Expense Ratio 0.14% 0.18%

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 S&P 500 Value ETF (IVE) is a Large Value fund that is issued by iShares. It currently has 22.4B total assets under management and has yielded an average annual return of 11.68% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.18%.

LQD’s dividend yield is 0.60% higher than that of IVE (2.48% vs. 1.88%). Also, LQD yielded on average 5.11% less per year over the past decade (6.58% vs. 11.68%). The expense ratio of LQD is 0.04 percentage points lower than IVE’s (0.14% vs. 0.18%).

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.

IVE - Holdings

IVE Holdings Weight
Berkshire Hathaway Inc Class B 3.05%
JPMorgan Chase & Co 2.65%
The Walt Disney Co 1.85%
Bank of America Corp 1.67%
Johnson & Johnson 1.57%
Exxon Mobil Corp 1.41%
Pfizer Inc 1.38%
Cisco Systems Inc 1.35%
Verizon Communications Inc 1.33%
Intel Corp 1.25%

IVE’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, The Walt Disney Co, Bank of America Corp, and Johnson & Johnson at 3.05%, 2.65%, 1.85%, 1.67%, and 1.57%.

Exxon Mobil Corp (1.41%), Pfizer Inc (1.38%), and Cisco Systems Inc (1.35%) have a slightly smaller but still significant weight. Verizon Communications Inc and Intel Corp are also represented in the IVE’s holdings at 1.33% and 1.25%.

Risk Analysis

LQD IVE
Mean Return 0.47 1.05
R-squared 66.93 92.08
Std. Deviation 5.94 14.3
Alpha 0.52 -2.9
Beta 1.62 1.01
Sharpe Ratio 0.85 0.83
Treynor Ratio 3.08 11.41

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

The iShares S&P 500 Value ETF (IVE) has a Treynor Ratio of 11.41 with a Mean Return of 1.05 and a Alpha of -2.9. Its Standard Deviation is 14.3 while IVE’s Sharpe Ratio is 0.83. Furthermore, the fund has a Beta of 1.01 and a R-squared of 92.08.

LQD’s Mean Return is 0.58 points lower than that of IVE and its R-squared is 25.15 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IVE. The Alpha and Beta of LQD are 3.42 points higher and 0.61 points higher than IVE’s Alpha and Beta.

Performance

Annual Returns

LQD vs. IVE - Annual Returns

Year LQD IVE
2020 11.14% 1.24%
2019 17.13% 31.71%
2018 -3.76% -9.09%
2017 7.16% 15.19%
2016 5.97% 17.17%
2015 -1.08% -3.24%
2014 8.57% 12.14%
2013 -2.49% 31.69%
2012 11.68% 17.45%
2011 8.89% -0.63%
2010 9.15% 14.9%

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 IVE, returning 31.71% on an annual basis. The poorest year for IVE in the last ten years was 2018, with a yield of -9.09%. Most years the iShares S&P 500 Value ETF has given investors modest returns, such as in 2014, 2010, and 2017, when gains were 12.14%, 14.9%, and 15.19% respectively.

Portfolio Growth

LQD vs. IVE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
IVE $10,000 $31,350 11.68%

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 IVE, the end total would have been $31,350. This equates to a $21,350 profit over 11 years and a compound annual growth rate (CAGR) of 11.68%.

LQD’s CAGR is 5.11 percentage points lower than that of IVE and as a result, would have yielded $11,574 less on a $10,000 investment. Thus, LQD performed worse than IVE by 5.11% annually.


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