TIP vs. IUSB: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and IUSB is a iShares N/A fund. So, what’s the difference between TIP and IUSB? And which fund is better?

The expense ratio of TIP is 0.13 percentage points higher than IUSB’s (0.19% vs. 0.06%). TIP is mostly comprised of AAA bonds and IUSB has a high exposure to AAA bond. Overall, TIP has provided lower returns than IUSB over the past ten years.

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

Summary

TIP IUSB
Name iShares TIPS Bond ETF iShares Core Total USD Bond Market ETF
Category Inflation-Protected Bond N/A
Issuer iShares iShares
AUM 28.3B 14.49B
Avg. Return 4.07% 4.13%
Div. Yield 1.87% 2.1%
Expense Ratio 0.19% 0.06%

The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

The iShares Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.

TIP’s dividend yield is 0.23% lower than that of IUSB (1.87% vs. 2.1%). Also, TIP yielded on average 0.06% less per year over the past decade (4.07% vs. 4.13%). The expense ratio of TIP is 0.13 percentage points higher than IUSB’s (0.19% vs. 0.06%).

Fund Composition

Holdings

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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.

IUSB - Holdings

IUSB Bond Sectors Weight
AAA 58.32%
BBB 16.98%
A 12.27%
BB 4.33%
AA 3.36%
B 2.8%
Others 1.01%
Below B 0.92%
US Government 0.0%

IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.

Risk Analysis

TIP IUSB
Mean Return 0.28 0
R-squared 66.57 0
Std. Deviation 4.33 0
Alpha -0.58 0
Beta 1.18 0
Sharpe Ratio 0.62 0
Treynor Ratio 2.24 0

The iShares TIPS Bond ETF (TIP) has a Standard Deviation of 4.33 with a Alpha of -0.58 and a Sharpe Ratio of 0.62. Its Treynor Ratio is 2.24 while TIP’s Mean Return is 0.28. Furthermore, the fund has a R-squared of 66.57 and a Beta of 1.18.

The iShares Core Total USD Bond Market ETF (IUSB) has a Beta of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its Sharpe Ratio is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Alpha of 0.

TIP’s Mean Return is 0.28 points higher than that of IUSB and its R-squared is 66.57 points higher. With a Standard Deviation of 4.33, TIP is slightly more volatile than IUSB. The Alpha and Beta of TIP are 0.58 points lower and 1.18 points higher than IUSB’s Alpha and Beta.

Performance

Annual Returns

TIP vs. IUSB - Annual Returns

Year TIP IUSB
2020 10.91% 7.59%
2019 8.28% 9.26%
2018 -1.43% -0.38%
2017 2.92% 4.06%
2016 4.56% 3.78%
2015 -1.59% 0.46%
2014 3.49% 0.0%
2013 -8.65% 0.0%
2012 6.8% 0.0%
2011 13.4% 0.0%
2010 6.1% 0.0%

TIP had its best year in 2011 with an annual return of 13.4%. TIP’s worst year over the past decade yielded -8.65% and occurred in 2013. In most years the iShares TIPS Bond ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to 3.49%, 4.56%, and 6.1% respectively.

The year 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.

Portfolio Growth

TIP vs. IUSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $12,536 4.07%
IUSB $10,000 $12,704 4.13%

A $10,000 investment in TIP would have resulted in a final balance of $12,536. This is a profit of $2,536 over 6 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.

TIP’s CAGR is 0.06 percentage points lower than that of IUSB and as a result, would have yielded $168 less on a $10,000 investment. Thus, TIP performed worse than IUSB by 0.06% annually.


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