VBR vs. TLT: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and TLT is a iShares Long Government fund. So, what’s the difference between VBR and TLT? And which fund is better?

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

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

Summary

VBR TLT
Name Vanguard Small-Cap Value Index Fund ETF Shares iShares 20+ Year Treasury Bond ETF
Category Small Value Long Government
Issuer Vanguard iShares
AUM 48.08B 15.15B
Avg. Return 12.28% 9.00%
Div. Yield 1.6% 1.5%
Expense Ratio 0.07% 0.15%

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 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%.

VBR’s dividend yield is 0.10% higher than that of TLT (1.6% vs. 1.5%). Also, VBR yielded on average 3.29% more per year over the past decade (12.28% vs. 9.00%). The expense ratio of VBR is 0.08 percentage points lower than TLT’s (0.07% vs. 0.15%).

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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%.

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.

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Risk Analysis

VBR TLT
Mean Return 1.08 0.63
R-squared 82.2 68.76
Std. Deviation 18.37 12.76
Alpha -5.09 -2.83
Beta 1.23 3.54
Sharpe Ratio 0.67 0.55
Treynor Ratio 9.15 1.82

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

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

VBR’s Mean Return is 0.45 points higher than that of TLT and its R-squared is 13.44 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than TLT. The Alpha and Beta of VBR are 2.26 points lower and 2.31 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

VBR vs. TLT - Annual Returns

Year VBR TLT
2020 5.82% 17.92%
2019 22.76% 14.93%
2018 -12.22% -2.07%
2017 11.79% 8.92%
2016 24.8% 1.36%
2015 -4.67% -1.65%
2014 10.55% 27.35%
2013 36.57% -13.91%
2012 18.78% 3.25%
2011 -4.05% 33.6%
2010 24.97% 9.25%

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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VBR vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VBR $10,000 $32,611 12.28%
TLT $10,000 $23,809 9.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

VBR’s CAGR is 3.29 percentage points higher than that of TLT and as a result, would have yielded $8,802 more on a $10,000 investment. Thus, VBR outperformed TLT by 3.29% annually.


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