TLT vs. IEF: What’s The Difference?

The iShares 20+ Year Treasury Bond ETF (TLT) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. TLT is a iShares Long Government fund and IEF is a iShares Long Government fund. So, what’s the difference between TLT and IEF? And which fund is better?

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

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

Summary

TLT IEF
Name iShares 20+ Year Treasury Bond ETF iShares 7-10 Year Treasury Bond ETF
Category Long Government Long Government
Issuer iShares iShares
AUM 15.15B 13.44B
Avg. Return 9.00% 5.06%
Div. Yield 1.5% 0.84%
Expense Ratio 0.15% 0.15%

The iShares 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% 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%.

TLT’s dividend yield is 0.66% higher than that of IEF (1.5% vs. 0.84%). Also, TLT yielded on average 3.93% more per year over the past decade (9.00% vs. 5.06%). TLT and IEF have the same expense ratio: 0.15%.

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Fund Composition

Holdings

TLT - Holdings

TLT 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%

TLT’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.

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.

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Risk Analysis

TLT IEF
Mean Return 0.63 0.32
R-squared 68.76 77.56
Std. Deviation 12.76 5.42
Alpha -2.83 -1.2
Beta 3.54 1.59
Sharpe Ratio 0.55 0.6
Treynor Ratio 1.82 1.97

The iShares 20+ Year Treasury Bond ETF (TLT) has a Mean Return of 0.63 with a Sharpe Ratio of 0.55 and a Treynor Ratio of 1.82. Its R-squared is 68.76 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a Alpha of -2.83 and a Beta of 3.54.

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

TLT’s Mean Return is 0.31 points higher than that of IEF and its R-squared is 8.80 points lower. With a Standard Deviation of 12.76, TLT is slightly more volatile than IEF. The Alpha and Beta of TLT are 1.63 points lower and 1.95 points higher than IEF’s Alpha and Beta.

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Performance

Annual Returns

TLT vs. IEF - Annual Returns

Year TLT IEF
2020 17.92% 9.84%
2019 14.93% 8.38%
2018 -2.07% 0.82%
2017 8.92% 2.47%
2016 1.36% 1.0%
2015 -1.65% 1.55%
2014 27.35% 8.92%
2013 -13.91% -6.12%
2012 3.25% 4.06%
2011 33.6% 15.46%
2010 9.25% 9.29%

TLT had its best year in 2011 with an annual return of 33.6%. TLT’s worst year over the past decade yielded -13.91% and occurred in 2013. In most years the iShares 20+ Year Treasury Bond ETF provided moderate returns such as in 2012, 2017, and 2010 where annual returns amounted to 3.25%, 8.92%, and 9.25% 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

TLT vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TLT $10,000 $23,809 9.00%
IEF $10,000 $16,936 5.06%

A $10,000 investment in TLT would have resulted in a final balance of $23,809. This is a profit of $13,809 over 11 years and amounts to a compound annual growth rate (CAGR) of 9.00%.

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%.

TLT’s CAGR is 3.93 percentage points higher than that of IEF and as a result, would have yielded $6,873 more on a $10,000 investment. Thus, TLT outperformed IEF by 3.93% annually.


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