VBR vs. MBB: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between VBR and MBB? And which fund is better?

The expense ratio of VBR is 0.01 percentage points higher than MBB’s (0.07% vs. 0.06%). VBR also has a high exposure to the financial services sector while MBB is mostly comprised of AAA bonds. Overall, VBR has provided higher returns than MBB over the past 11 years.

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

Summary

VBR MBB
Name Vanguard Small-Cap Value Index Fund ETF Shares iShares MBS ETF
Category Small Value Intermediate Government
Issuer Vanguard iShares
AUM 48.08B 25.69B
Avg. Return 12.28% 3.08%
Div. Yield 1.6% 1.88%
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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

VBR’s dividend yield is 0.28% lower than that of MBB (1.6% vs. 1.88%). Also, VBR yielded on average 9.21% more per year over the past decade (12.28% vs. 3.08%). The expense ratio of VBR is 0.01 percentage points higher than MBB’s (0.07% vs. 0.06%).

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Fund Composition

Holdings

VBR - 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%.

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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

VBR MBB
Mean Return 1.08 0.2
R-squared 82.2 74.38
Std. Deviation 18.37 2.12
Alpha -5.09 0.14
Beta 1.23 0.6
Sharpe Ratio 0.67 0.87
Treynor Ratio 9.15 3.02

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a R-squared of 82.2 with a Standard Deviation of 18.37 and a Sharpe Ratio of 0.67. Its Treynor Ratio is 9.15 while VBR’s Mean Return is 1.08. Furthermore, the fund has a Alpha of -5.09 and a Beta of 1.23.

The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a Beta of 0.6 and a Standard Deviation of 2.12. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Treynor Ratio of 3.02 and a Sharpe Ratio of 0.87.

VBR’s Mean Return is 0.88 points higher than that of MBB and its R-squared is 7.82 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than MBB. The Alpha and Beta of VBR are 5.23 points lower and 0.63 points higher than MBB’s Alpha and Beta.

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Performance

Annual Returns

VBR vs. MBB - Annual Returns

Year VBR MBB
2020 5.82% 4.03%
2019 22.76% 6.27%
2018 -12.22% 0.81%
2017 11.79% 2.37%
2016 24.8% 1.28%
2015 -4.67% 1.28%
2014 10.55% 6.16%
2013 36.57% -1.92%
2012 18.78% 2.23%
2011 -4.05% 5.88%
2010 24.97% 5.44%

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 MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

VBR vs. MBB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VBR $10,000 $32,611 12.28%
MBB $10,000 $13,906 3.08%

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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

VBR’s CAGR is 9.21 percentage points higher than that of MBB and as a result, would have yielded $18,705 more on a $10,000 investment. Thus, VBR outperformed MBB by 9.21% annually.


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