The iShares MSCI USA Min Vol Factor ETF (USMV) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between USMV and IGSB? And which fund is better?
The expense ratio of USMV is 0.09 percentage points higher than IGSB’s (0.15% vs. 0.06%). USMV also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, USMV has provided higher returns than IGSB over the past 8 years.
In this article, we’ll compare USMV vs. IGSB. We’ll look at performance and industry exposure, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss USMV’s and IGSB’s annual returns, risk metrics, and fund composition and examine how these affect their overall returns.
Summary
| USMV | IGSB | |
| Name | iShares MSCI USA Min Vol Factor ETF | iShares 1-5 Year Investment Grade Corporate Bond ETF |
| Category | Large Blend | Short-Term Bond |
| Issuer | iShares | iShares |
| AUM | 27.6B | 26.63B |
| Avg. Return | 13.89% | 2.51% |
| Div. Yield | 1.5% | 2.02% |
| Expense Ratio | 0.15% | 0.06% |
The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
USMV’s dividend yield is 0.52% lower than that of IGSB (1.5% vs. 2.02%). Also, USMV yielded on average 11.39% more per year over the past decade (13.89% vs. 2.51%). The expense ratio of USMV is 0.09 percentage points higher than IGSB’s (0.15% vs. 0.06%).
Fund Composition
Holdings
| USMV Holdings | Weight |
| Eli Lilly and Co | 1.64% |
| Microsoft Corp | 1.62% |
| T-Mobile US Inc | 1.51% |
| Accenture PLC Class A | 1.51% |
| Visa Inc Class A | 1.49% |
| Waste Management Inc | 1.45% |
| Adobe Inc | 1.45% |
| The Kroger Co | 1.44% |
| Johnson & Johnson | 1.42% |
| Gilead Sciences Inc | 1.42% |
USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.
Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.
| IGSB Bond Sectors | Weight |
| BBB | 50.48% |
| A | 40.04% |
| AA | 7.46% |
| AAA | 2.21% |
| BB | 0.09% |
| Below B | 0.0% |
| B | 0.0% |
| US Government | 0.0% |
| Others | -0.28% |
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
Risk Analysis
| USMV | IGSB | |
| Mean Return | 0 | 0.19 |
| R-squared | 0 | 26.13 |
| Std. Deviation | 0 | 2 |
| Alpha | 0 | 0.69 |
| Beta | 0 | 0.34 |
| Sharpe Ratio | 0 | 0.82 |
| Treynor Ratio | 0 | 4.82 |
The iShares MSCI USA Min Vol Factor ETF (USMV) has a Mean Return of 0 with a Alpha of 0 and a Standard Deviation of 0. Its Beta is 0 while USMV’s Sharpe Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Treynor Ratio of 0.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Sharpe Ratio of 0.82 with a Standard Deviation of 2 and a Treynor Ratio of 4.82. Its Beta is 0.34 while IGSB’s Mean Return is 0.19. Furthermore, the fund has a R-squared of 26.13 and a Alpha of 0.69.
USMV’s Mean Return is 0.19 points lower than that of IGSB and its R-squared is 26.13 points lower. With a Standard Deviation of 0, USMV is slightly less volatile than IGSB. The Alpha and Beta of USMV are 0.69 points lower and 0.34 points lower than IGSB’s Alpha and Beta.
Performance
Annual Returns
| Year | USMV | IGSB |
| 2020 | 5.6% | 5.26% |
| 2019 | 27.77% | 7.01% |
| 2018 | 1.36% | 1.34% |
| 2017 | 18.97% | 1.41% |
| 2016 | 10.5% | 1.77% |
| 2015 | 5.5% | 0.7% |
| 2014 | 16.34% | 0.74% |
| 2013 | 25.11% | 1.03% |
| 2012 | 11.04% | 3.28% |
| 2011 | 0.0% | 1.34% |
| 2010 | 0.0% | 3.69% |
USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% respectively.
The year 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| USMV | $10,000 | $27,607 | 13.89% |
| IGSB | $10,000 | $12,073 | 2.51% |
A $10,000 investment in USMV would have resulted in a final balance of $27,607. This is a profit of $17,607 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.89%.
With a $10,000 investment in IGSB, the end total would have been $12,073. This equates to a $2,073 profit over 8 years and a compound annual growth rate (CAGR) of 2.51%.
USMV’s CAGR is 11.39 percentage points higher than that of IGSB and as a result, would have yielded $15,534 more on a $10,000 investment. Thus, USMV outperformed IGSB by 11.39% annually.
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