VCIT vs. GOVT: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VCIT and GOVT? And which fund is better?

VCIT and GOVT have the same expense ratio: 0.05%. VCIT is mostly comprised of BBB bonds and GOVT has a high exposure to AAA bond. Overall, VCIT has provided higher returns than GOVT over the past ten years.

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

Summary

VCIT GOVT
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares U.S. Treasury Bond ETF
Category Corporate Bond Intermediate Government
Issuer Vanguard iShares
AUM 48.39B 17.07B
Avg. Return 5.84% 2.67%
Div. Yield 2.33% 1.0%
Expense Ratio 0.05% 0.05%

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

VCIT’s dividend yield is 1.33% higher than that of GOVT (2.33% vs. 1.0%). Also, VCIT yielded on average 3.17% more per year over the past decade (5.84% vs. 2.67%). VCIT and GOVT have the same expense ratio: 0.05%.

Fund Composition

Holdings

VCIT - Holdings

VCIT Bond Sectors Weight
BBB 55.28%
A 37.85%
AA 5.22%
AAA 1.57%
Below B 0.08%
Others 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.

GOVT - Holdings

GOVT 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%

GOVT’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

VCIT GOVT
Mean Return 0.44 0
R-squared 63.18 0
Std. Deviation 5.08 0
Alpha 0.89 0
Beta 1.35 0
Sharpe Ratio 0.91 0
Treynor Ratio 3.43 0

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Treynor Ratio of 3.43 with a Mean Return of 0.44 and a R-squared of 63.18. Its Sharpe Ratio is 0.91 while VCIT’s Standard Deviation is 5.08. Furthermore, the fund has a Alpha of 0.89 and a Beta of 1.35.

The iShares U.S. Treasury Bond ETF (GOVT) has a Mean Return of 0 with a Alpha of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while GOVT’s Sharpe Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Beta of 0.

VCIT’s Mean Return is 0.44 points higher than that of GOVT and its R-squared is 63.18 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than GOVT. The Alpha and Beta of VCIT are 0.89 points higher and 1.35 points higher than GOVT’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. GOVT - Annual Returns

Year VCIT GOVT
2020 9.55% 7.92%
2019 13.97% 6.71%
2018 -1.75% 0.74%
2017 5.5% 2.19%
2016 5.3% 0.92%
2015 0.88% 0.76%
2014 7.47% 4.99%
2013 -1.8% -2.84%
2012 11.36% 0.0%
2011 7.94% 0.0%
2010 10.65% 0.0%

VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

VCIT vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $14,508 5.84%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in VCIT would have resulted in a final balance of $14,508. This is a profit of $4,508 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

VCIT’s CAGR is 3.17 percentage points higher than that of GOVT and as a result, would have yielded $2,211 more on a $10,000 investment. Thus, VCIT outperformed GOVT by 3.17% annually.


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