The iShares MBS ETF (MBB) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and VHT is a Vanguard Health fund. So, what’s the difference between MBB and VHT? And which fund is better?
The expense ratio of MBB is 0.04 percentage points lower than VHT’s (0.06% vs. 0.1%). MBB is mostly comprised of AAA bonds while VHT has a high exposure to the healthcare sector. Overall, MBB has provided lower returns than VHT over the past 11 years.
In this article, we’ll compare MBB vs. VHT. We’ll look at annual returns and performance, as well as at their industry exposure and holdings. Moreover, I’ll also discuss MBB’s and VHT’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| MBB | VHT | |
| Name | iShares MBS ETF | Vanguard Health Care Index Fund ETF Shares |
| Category | Intermediate Government | Health |
| Issuer | iShares | Vanguard |
| AUM | 25.69B | 17.94B |
| Avg. Return | 3.08% | 16.04% |
| Div. Yield | 1.88% | 1.15% |
| Expense Ratio | 0.06% | 0.1% |
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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
MBB’s dividend yield is 0.73% higher than that of VHT (1.88% vs. 1.15%). Also, MBB yielded on average 12.96% less per year over the past decade (3.08% vs. 16.04%). The expense ratio of MBB is 0.04 percentage points lower than VHT’s (0.06% vs. 0.1%).
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.
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
Risk Analysis
| MBB | VHT | |
| Mean Return | 0.2 | 1.33 |
| R-squared | 74.38 | 59.86 |
| Std. Deviation | 2.12 | 13.58 |
| Alpha | 0.14 | 7.99 |
| Beta | 0.6 | 0.75 |
| Sharpe Ratio | 0.87 | 1.13 |
| Treynor Ratio | 3.02 | 20.74 |
The iShares MBS ETF (MBB) has a Standard Deviation of 2.12 with a Alpha of 0.14 and a Sharpe Ratio of 0.87. Its Treynor Ratio is 3.02 while MBB’s Mean Return is 0.2. Furthermore, the fund has a Beta of 0.6 and a R-squared of 74.38.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Alpha of 7.99 with a Treynor Ratio of 20.74 and a Beta of 0.75. Its R-squared is 59.86 while VHT’s Mean Return is 1.33. Furthermore, the fund has a Standard Deviation of 13.58 and a Sharpe Ratio of 1.13.
MBB’s Mean Return is 1.13 points lower than that of VHT and its R-squared is 14.52 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than VHT. The Alpha and Beta of MBB are 7.85 points lower and 0.15 points lower than VHT’s Alpha and Beta.
Performance
Annual Returns
| Year | MBB | VHT |
| 2020 | 4.03% | 18.21% |
| 2019 | 6.27% | 21.97% |
| 2018 | 0.81% | 5.55% |
| 2017 | 2.37% | 23.34% |
| 2016 | 1.28% | -3.33% |
| 2015 | 1.28% | 7.22% |
| 2014 | 6.16% | 25.38% |
| 2013 | -1.92% | 42.67% |
| 2012 | 2.23% | 19.1% |
| 2011 | 5.88% | 10.57% |
| 2010 | 5.44% | 5.75% |
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 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| MBB | $10,000 | $13,906 | 3.08% |
| VHT | $10,000 | $48,464 | 16.04% |
A $10,000 investment in MBB would have resulted in a final balance of $13,906. This is a profit of $3,906 over 11 years and amounts to a compound annual growth rate (CAGR) of 3.08%.
With a $10,000 investment in VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.
MBB’s CAGR is 12.96 percentage points lower than that of VHT and as a result, would have yielded $34,558 less on a $10,000 investment. Thus, MBB performed worse than VHT by 12.96% annually.
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