MDY vs. IEF: What’s The Difference?

The SPDR S&P MIDCAP 400 ETF Trust (MDY) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between MDY and IEF? And which fund is better?

The expense ratio of MDY is 0.08 percentage points higher than IEF’s (0.23% vs. 0.15%). MDY also has a high exposure to the industrials sector while IEF is mostly comprised of AAA bonds. Overall, MDY has provided higher returns than IEF over the past 11 years.

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

Summary

MDY IEF
Name SPDR S&P MIDCAP 400 ETF Trust iShares 7-10 Year Treasury Bond ETF
Category Mid-Cap Blend Long Government
Issuer SPDR State Street Global Advisors iShares
AUM 21.31B 13.44B
Avg. Return 13.29% 5.06%
Div. Yield 0.94% 0.84%
Expense Ratio 0.23% 0.15%

The SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

MDY’s dividend yield is 0.10% higher than that of IEF (0.94% vs. 0.84%). Also, MDY yielded on average 8.23% more per year over the past decade (13.29% vs. 5.06%). The expense ratio of MDY is 0.08 percentage points higher than IEF’s (0.23% vs. 0.15%).

Fund Composition

Holdings

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

IEF - Holdings

IEF Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.

Risk Analysis

MDY IEF
Mean Return 1.08 0.32
R-squared 86.66 77.56
Std. Deviation 16.83 5.42
Alpha -4.1 -1.2
Beta 1.15 1.59
Sharpe Ratio 0.73 0.6
Treynor Ratio 9.97 1.97

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Alpha of -4.1 with a Treynor Ratio of 9.97 and a Standard Deviation of 16.83. Its Sharpe Ratio is 0.73 while MDY’s Beta is 1.15. Furthermore, the fund has a R-squared of 86.66 and a Mean Return of 1.08.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Treynor Ratio of 1.97 and a Standard Deviation of 5.42. Its Sharpe Ratio is 0.6 while IEF’s R-squared is 77.56. Furthermore, the fund has a Mean Return of 0.32 and a Beta of 1.59.

MDY’s Mean Return is 0.76 points higher than that of IEF and its R-squared is 9.10 points higher. With a Standard Deviation of 16.83, MDY is slightly more volatile than IEF. The Alpha and Beta of MDY are 2.90 points lower and 0.44 points lower than IEF’s Alpha and Beta.

Performance

Annual Returns

MDY vs. IEF - Annual Returns

Year MDY IEF
2020 13.51% 9.84%
2019 25.86% 8.38%
2018 -11.28% 0.82%
2017 15.89% 2.47%
2016 20.33% 1.0%
2015 -2.4% 1.55%
2014 9.42% 8.92%
2013 33.08% -6.12%
2012 17.58% 4.06%
2011 -1.99% 15.46%
2010 26.17% 9.29%

MDY had its best year in 2013 with an annual return of 33.08%. MDY’s worst year over the past decade yielded -11.28% and occurred in 2018. In most years the SPDR S&P MIDCAP 400 ETF Trust provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 13.51%, 15.89%, and 17.58% respectively.

The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

MDY vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MDY $10,000 $36,524 13.29%
IEF $10,000 $16,936 5.06%

A $10,000 investment in MDY would have resulted in a final balance of $36,524. This is a profit of $26,524 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.29%.

With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.

MDY’s CAGR is 8.23 percentage points higher than that of IEF and as a result, would have yielded $19,588 more on a $10,000 investment. Thus, MDY outperformed IEF by 8.23% annually.


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