SHY vs. IEF: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and IEF is a iShares Long Government fund. So, what’s the difference between SHY and IEF? And which fund is better?

SHY and IEF have the same expense ratio: 0.15%. SHY is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, SHY has provided lower returns than IEF over the past 11 years.

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

Summary

SHY IEF
Name iShares 1-3 Year Treasury Bond ETF iShares 7-10 Year Treasury Bond ETF
Category Short Government Long Government
Issuer iShares iShares
AUM 19.51B 13.44B
Avg. Return 1.27% 5.06%
Div. Yield 0.46% 0.84%
Expense Ratio 0.15% 0.15%

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

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%.

SHY’s dividend yield is 0.38% lower than that of IEF (0.46% vs. 0.84%). Also, SHY yielded on average 3.79% less per year over the past decade (1.27% vs. 5.06%). SHY and IEF have the same expense ratio: 0.15%.

Fund Composition

Holdings

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.

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

SHY IEF
Mean Return 0.09 0.32
R-squared 39.11 77.56
Std. Deviation 0.89 5.42
Alpha -0.03 -1.2
Beta 0.18 1.59
Sharpe Ratio 0.54 0.6
Treynor Ratio 2.6 1.97

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Alpha of -0.03 with a Sharpe Ratio of 0.54 and a Beta of 0.18. Its Treynor Ratio is 2.6 while SHY’s Mean Return is 0.09. Furthermore, the fund has a Standard Deviation of 0.89 and a R-squared of 39.11.

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

SHY’s Mean Return is 0.23 points lower than that of IEF and its R-squared is 38.45 points lower. With a Standard Deviation of 0.89, SHY is slightly less volatile than IEF. The Alpha and Beta of SHY are 1.17 points higher and 1.41 points lower than IEF’s Alpha and Beta.

Performance

Annual Returns

SHY vs. IEF - Annual Returns

Year SHY IEF
2020 3.01% 9.84%
2019 3.42% 8.38%
2018 1.45% 0.82%
2017 0.27% 2.47%
2016 0.75% 1.0%
2015 0.43% 1.55%
2014 0.48% 8.92%
2013 0.23% -6.12%
2012 0.31% 4.06%
2011 1.43% 15.46%
2010 2.23% 9.29%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% 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

SHY vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SHY $10,000 $11,486 1.27%
IEF $10,000 $16,936 5.06%

A $10,000 investment in SHY would have resulted in a final balance of $11,486. This is a profit of $1,486 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

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%.

SHY’s CAGR is 3.79 percentage points lower than that of IEF and as a result, would have yielded $5,450 less on a $10,000 investment. Thus, SHY performed worse than IEF by 3.79% annually.


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