The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VBR and IGSB? And which fund is better?
The expense ratio of VBR is 0.01 percentage points higher than IGSB’s (0.07% vs. 0.06%). VBR also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, VBR has provided higher returns than IGSB over the past 11 years.
In this article, we’ll compare VBR vs. IGSB. We’ll look at industry exposure and portfolio growth, as well as at their fund composition and performance. Moreover, I’ll also discuss VBR’s and IGSB’s holdings, risk metrics, and annual returns and examine how these affect their overall returns.
Summary
| VBR | IGSB | |
| Name | Vanguard Small-Cap Value Index Fund ETF Shares | iShares 1-5 Year Investment Grade Corporate Bond ETF |
| Category | Small Value | Short-Term Bond |
| Issuer | Vanguard | iShares |
| AUM | 48.08B | 26.63B |
| Avg. Return | 12.28% | 2.51% |
| Div. Yield | 1.6% | 2.02% |
| Expense Ratio | 0.07% | 0.06% |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
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%.
VBR’s dividend yield is 0.42% lower than that of IGSB (1.6% vs. 2.02%). Also, VBR yielded on average 9.78% more per year over the past decade (12.28% vs. 2.51%). The expense ratio of VBR is 0.01 percentage points higher than IGSB’s (0.07% vs. 0.06%).
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Fund Composition
Holdings
| VBR Holdings | Weight |
| Diamondback Energy Inc | 0.55% |
| VICI Properties Inc Ordinary Shares | 0.54% |
| IDEX Corp | 0.54% |
| Nuance Communications Inc | 0.5% |
| Molina Healthcare Inc | 0.48% |
| Signature Bank | 0.46% |
| Novavax Inc | 0.44% |
| Howmet Aerospace Inc | 0.44% |
| Apollo Global Management Inc Class A | 0.42% |
| Brown & Brown Inc | 0.41% |
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
| 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.
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Risk Analysis
| VBR | IGSB | |
| Mean Return | 1.08 | 0.19 |
| R-squared | 82.2 | 26.13 |
| Std. Deviation | 18.37 | 2 |
| Alpha | -5.09 | 0.69 |
| Beta | 1.23 | 0.34 |
| Sharpe Ratio | 0.67 | 0.82 |
| Treynor Ratio | 9.15 | 4.82 |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Treynor Ratio of 9.15 with a Beta of 1.23 and a Standard Deviation of 18.37. Its Mean Return is 1.08 while VBR’s Sharpe Ratio is 0.67. Furthermore, the fund has a R-squared of 82.2 and a Alpha of -5.09.
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 Mean Return of 0.19. Its R-squared is 26.13 while IGSB’s Beta is 0.34. Furthermore, the fund has a Treynor Ratio of 4.82 and a Alpha of 0.69.
VBR’s Mean Return is 0.89 points higher than that of IGSB and its R-squared is 56.07 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than IGSB. The Alpha and Beta of VBR are 5.78 points lower and 0.89 points higher than IGSB’s Alpha and Beta.
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Performance
Annual Returns
| Year | VBR | IGSB |
| 2020 | 5.82% | 5.26% |
| 2019 | 22.76% | 7.01% |
| 2018 | -12.22% | 1.34% |
| 2017 | 11.79% | 1.41% |
| 2016 | 24.8% | 1.77% |
| 2015 | -4.67% | 0.7% |
| 2014 | 10.55% | 0.74% |
| 2013 | 36.57% | 1.03% |
| 2012 | 18.78% | 3.28% |
| 2011 | -4.05% | 1.34% |
| 2010 | 24.97% | 3.69% |
VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% 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 |
| VBR | $10,000 | $32,611 | 12.28% |
| IGSB | $10,000 | $13,103 | 2.51% |
A $10,000 investment in VBR would have resulted in a final balance of $32,611. This is a profit of $22,611 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.28%.
With a $10,000 investment in IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
VBR’s CAGR is 9.78 percentage points higher than that of IGSB and as a result, would have yielded $19,508 more on a $10,000 investment. Thus, VBR outperformed IGSB by 9.78% annually.
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