The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and VLUE is a iShares Large Value fund. So, what’s the difference between LQD and VLUE? And which fund is better?
The expense ratio of LQD is 0.01 percentage points lower than VLUE’s (0.14% vs. 0.15%). LQD is mostly comprised of BBB bonds while VLUE has a high exposure to the technology sector. Overall, LQD has provided lower returns than VLUE over the past ten years.
In this article, we’ll compare LQD vs. VLUE. We’ll look at holdings and fund composition, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss LQD’s and VLUE’s portfolio growth, performance, and risk metrics and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares MSCI USA Value Factor ETF|
|Category||Corporate Bond||Large Value|
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 USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.
LQD’s dividend yield is 0.59% higher than that of VLUE (2.48% vs. 1.89%). Also, LQD yielded on average 2.33% less per year over the past decade (6.58% vs. 8.91%). The expense ratio of LQD is 0.01 percentage points lower than VLUE’s (0.14% vs. 0.15%).
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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.
|General Motors Co||3.19%|
|Micron Technology Inc||3.14%|
|Cisco Systems Inc||3.05%|
|International Business Machines Corp||2.76%|
|Ford Motor Co||2.23%|
VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.
International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.
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The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Alpha of 0.52 with a Sharpe Ratio of 0.85 and a Mean Return of 0.47. Its Beta is 1.62 while LQD’s R-squared is 66.93. Furthermore, the fund has a Treynor Ratio of 3.08 and a Standard Deviation of 5.94.
The iShares MSCI USA Value Factor ETF (VLUE) has a Alpha of 0 with a Mean Return of 0 and a Beta of 0. Its Treynor Ratio is 0 while VLUE’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.
LQD’s Mean Return is 0.47 points higher than that of VLUE and its R-squared is 66.93 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than VLUE. The Alpha and Beta of LQD are 0.52 points higher and 1.62 points higher than VLUE’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 VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $15,279. This is a profit of $5,279 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.
LQD’s CAGR is 2.33 percentage points lower than that of VLUE and as a result, would have yielded $1,968 less on a $10,000 investment. Thus, LQD performed worse than VLUE by 2.33% annually.
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