LQD vs. IWP: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Russell Mid-Cap Growth ETF (IWP) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IWP is a iShares Mid-Cap Growth fund. So, what’s the difference between LQD and IWP? And which fund is better?

The expense ratio of LQD is 0.10 percentage points lower than IWP’s (0.14% vs. 0.24%). LQD is mostly comprised of BBB bonds while IWP has a high exposure to the technology sector. Overall, LQD has provided lower returns than IWP over the past ten years.

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

Summary

LQD IWP
Name iShares iBoxx $ Investment Grade Corporate Bond ETF iShares Russell Mid-Cap Growth ETF
Category Corporate Bond Mid-Cap Growth
Issuer iShares iShares
AUM 40.23B 15.7B
Avg. Return 6.58% 16.75%
Div. Yield 2.48% 0.26%
Expense Ratio 0.14% 0.24%

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 Russell Mid-Cap Growth ETF (IWP) is a Mid-Cap Growth fund that is issued by iShares. It currently has 15.7B total assets under management and has yielded an average annual return of 16.75% over the past 10 years. The fund has a dividend yield of 0.26% with an expense ratio of 0.24%.

LQD’s dividend yield is 2.22% higher than that of IWP (2.48% vs. 0.26%). Also, LQD yielded on average 10.17% less per year over the past decade (6.58% vs. 16.75%). The expense ratio of LQD is 0.10 percentage points lower than IWP’s (0.14% vs. 0.24%).

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.

IWP - Holdings

IWP Holdings Weight
IDEXX Laboratories Inc 1.3%
DocuSign Inc 1.3%
Roku Inc Class A 1.29%
Match Group Inc 1.06%
Chipotle Mexican Grill Inc 1.06%
Pinterest Inc 1.05%
Veeva Systems Inc Class A 1.04%
Palantir Technologies Inc Ordinary Shares – Class A 1.04%
Lululemon Athletica Inc 1.01%
DexCom Inc 1.0%

IWP’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Roku Inc Class A, Match Group Inc, and Chipotle Mexican Grill Inc at 1.3%, 1.3%, 1.29%, 1.06%, and 1.06%.

Pinterest Inc (1.05%), Veeva Systems Inc Class A (1.04%), and Palantir Technologies Inc Ordinary Shares – Class A (1.04%) have a slightly smaller but still significant weight. Lululemon Athletica Inc and DexCom Inc are also represented in the IWP’s holdings at 1.01% and 1.0%.

Risk Analysis

LQD IWP
Mean Return 0.47 1.27
R-squared 66.93 87.01
Std. Deviation 5.94 16.05
Alpha 0.52 -1.03
Beta 1.62 1.1
Sharpe Ratio 0.85 0.91
Treynor Ratio 3.08 12.98

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

The iShares Russell Mid-Cap Growth ETF (IWP) has a Mean Return of 1.27 with a Beta of 1.1 and a Standard Deviation of 16.05. Its Alpha is -1.03 while IWP’s Sharpe Ratio is 0.91. Furthermore, the fund has a R-squared of 87.01 and a Treynor Ratio of 12.98.

LQD’s Mean Return is 0.80 points lower than that of IWP and its R-squared is 20.08 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IWP. The Alpha and Beta of LQD are 1.55 points higher and 0.52 points higher than IWP’s Alpha and Beta.

Performance

Annual Returns

LQD vs. IWP - Annual Returns

Year LQD IWP
2020 11.14% 35.29%
2019 17.13% 35.14%
2018 -3.76% -4.95%
2017 7.16% 24.98%
2016 5.97% 7.15%
2015 -1.08% -0.39%
2014 8.57% 11.68%
2013 -2.49% 35.44%
2012 11.68% 15.62%
2011 8.89% -1.82%
2010 9.15% 26.1%

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 IWP, returning 35.44% on an annual basis. The poorest year for IWP in the last ten years was 2018, with a yield of -4.95%. Most years the iShares Russell Mid-Cap Growth ETF has given investors modest returns, such as in 2014, 2012, and 2017, when gains were 11.68%, 15.62%, and 24.98% respectively.

Portfolio Growth

LQD vs. IWP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
IWP $10,000 $50,191 16.75%

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 IWP, the end total would have been $50,191. This equates to a $40,191 profit over 11 years and a compound annual growth rate (CAGR) of 16.75%.

LQD’s CAGR is 10.17 percentage points lower than that of IWP and as a result, would have yielded $30,415 less on a $10,000 investment. Thus, LQD performed worse than IWP by 10.17% annually.


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