The iShares MBS ETF (MBB) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and QUAL is a iShares Large Blend fund. So, what’s the difference between MBB and QUAL? And which fund is better?
The expense ratio of MBB is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%). MBB is mostly comprised of AAA bonds while QUAL has a high exposure to the technology sector. Overall, MBB has provided lower returns than QUAL over the past 7 years.
In this article, we’ll compare MBB vs. QUAL. We’ll look at industry exposure and portfolio growth, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss MBB’s and QUAL’s performance, holdings, and annual returns and examine how these affect their overall returns.
Summary
| MBB | QUAL | |
| Name | iShares MBS ETF | iShares MSCI USA Quality Factor ETF |
| Category | Intermediate Government | Large Blend |
| Issuer | iShares | iShares |
| AUM | 25.69B | 23.93B |
| Avg. Return | 3.08% | 13.42% |
| Div. Yield | 1.88% | 1.29% |
| Expense Ratio | 0.06% | 0.15% |
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
MBB’s dividend yield is 0.59% higher than that of QUAL (1.88% vs. 1.29%). Also, MBB yielded on average 10.35% less per year over the past decade (3.08% vs. 13.42%). The expense ratio of MBB is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%).
Fund Composition
Holdings
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
| QUAL Holdings | Weight |
| Facebook Inc Class A | 4.77% |
| Nike Inc Class B | 4.05% |
| Microsoft Corp | 3.54% |
| Apple Inc | 3.52% |
| Johnson & Johnson | 2.99% |
| BlackRock Inc | 2.87% |
| Target Corp | 2.8% |
| Mastercard Inc Class A | 2.72% |
| NVIDIA Corp | 2.71% |
| Alphabet Inc Class A | 2.49% |
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
Risk Analysis
| MBB | QUAL | |
| Mean Return | 0.2 | 0 |
| R-squared | 74.38 | 0 |
| Std. Deviation | 2.12 | 0 |
| Alpha | 0.14 | 0 |
| Beta | 0.6 | 0 |
| Sharpe Ratio | 0.87 | 0 |
| Treynor Ratio | 3.02 | 0 |
The iShares MBS ETF (MBB) has a Beta of 0.6 with a Standard Deviation of 2.12 and a Alpha of 0.14. Its R-squared is 74.38 while MBB’s Mean Return is 0.2. Furthermore, the fund has a Treynor Ratio of 3.02 and a Sharpe Ratio of 0.87.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Alpha of 0 with a R-squared of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while QUAL’s Beta is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.
MBB’s Mean Return is 0.20 points higher than that of QUAL and its R-squared is 74.38 points higher. With a Standard Deviation of 2.12, MBB is slightly more volatile than QUAL. The Alpha and Beta of MBB are 0.14 points higher and 0.60 points higher than QUAL’s Alpha and Beta.
Performance
Annual Returns
| Year | MBB | QUAL |
| 2020 | 4.03% | 16.96% |
| 2019 | 6.27% | 34.14% |
| 2018 | 0.81% | -5.77% |
| 2017 | 2.37% | 22.26% |
| 2016 | 1.28% | 9.18% |
| 2015 | 1.28% | 5.56% |
| 2014 | 6.16% | 11.62% |
| 2013 | -1.92% | 0.0% |
| 2012 | 2.23% | 0.0% |
| 2011 | 5.88% | 0.0% |
| 2010 | 5.44% | 0.0% |
MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% respectively.
The year 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| MBB | $10,000 | $12,423 | 3.08% |
| QUAL | $10,000 | $23,251 | 13.42% |
A $10,000 investment in MBB would have resulted in a final balance of $12,423. This is a profit of $2,423 over 7 years and amounts to a compound annual growth rate (CAGR) of 3.08%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
MBB’s CAGR is 10.35 percentage points lower than that of QUAL and as a result, would have yielded $10,828 less on a $10,000 investment. Thus, MBB performed worse than QUAL by 10.35% annually.
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