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VBK vs. IEF: What’s The Difference?

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VBK is a Vanguard Small Growth fund and IEF is a iShares Long Government fund. So, what’s the difference between VBK and IEF? And which fund is better?

The expense ratio of VBK is 0.08 percentage points lower than IEF’s (0.07% vs. 0.15%). VBK also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VBK has provided higher returns than IEF over the past 11 years.

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

Summary

VBKIEF
NameVanguard Small-Cap Growth Index Fund ETF SharesiShares 7-10 Year Treasury Bond ETF
CategorySmall GrowthLong Government
IssuerVanguardiShares
AUM37.89B13.44B
Avg. Return16.53%5.06%
Div. Yield0.45%0.84%
Expense Ratio0.07%0.15%

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

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%.

VBK’s dividend yield is 0.39% lower than that of IEF (0.45% vs. 0.84%). Also, VBK yielded on average 11.47% more per year over the past decade (16.53% vs. 5.06%). The expense ratio of VBK is 0.08 percentage points lower than IEF’s (0.07% vs. 0.15%).

Fund Composition

Holdings

VBK - Holdings

VBK HoldingsWeight
Charles River Laboratories International Inc0.78%
Pool Corp0.73%
Bio-Techne Corp0.73%
Avantor Inc0.73%
PerkinElmer Inc0.72%
Entegris Inc0.7%
PTC Inc0.62%
Fair Isaac Corp0.57%
Bill.com Holdings Inc Ordinary Shares0.56%
Avalara Inc0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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

VBKIEF
Mean Return1.220.32
R-squared80.5677.56
Std. Deviation17.955.42
Alpha-2.81-1.2
Beta1.181.59
Sharpe Ratio0.780.6
Treynor Ratio11.181.97

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Standard Deviation of 17.95 with a Alpha of -2.81 and a Treynor Ratio of 11.18. Its Sharpe Ratio is 0.78 while VBK’s Mean Return is 1.22. Furthermore, the fund has a Beta of 1.18 and a R-squared of 80.56.

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

VBK’s Mean Return is 0.90 points higher than that of IEF and its R-squared is 3.00 points higher. With a Standard Deviation of 17.95, VBK is slightly more volatile than IEF. The Alpha and Beta of VBK are 1.61 points lower and 0.41 points lower than IEF’s Alpha and Beta.

Performance

Annual Returns

VBK vs. IEF - Annual Returns

YearVBKIEF
202035.29%9.84%
201932.75%8.38%
2018-5.68%0.82%
201721.9%2.47%
201610.74%1.0%
2015-2.51%1.55%
20144.02%8.92%
201338.18%-6.12%
201217.67%4.06%
2011-1.43%15.46%
201030.87%9.29%

VBK had its best year in 2013 with an annual return of 38.18%. VBK’s worst year over the past decade yielded -5.68% and occurred in 2018. In most years the Vanguard Small-Cap Growth Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2017 where annual returns amounted to 10.74%, 17.67%, and 21.9% 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

VBK vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBK$10,000$48,63916.53%
IEF$10,000$16,9365.06%

A $10,000 investment in VBK would have resulted in a final balance of $48,639. This is a profit of $38,639 over 11 years and amounts to a compound annual growth rate (CAGR) of 16.53%.

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%.

VBK’s CAGR is 11.47 percentage points higher than that of IEF and as a result, would have yielded $31,703 more on a $10,000 investment. Thus, VBK outperformed IEF by 11.47% annually.


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