VCIT vs. IUSB: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IUSB is a iShares N/A fund. So, what’s the difference between VCIT and IUSB? And which fund is better?

The expense ratio of VCIT is 0.01 percentage points lower than IUSB’s (0.05% vs. 0.06%). VCIT is mostly comprised of BBB bonds and IUSB has a high exposure to AAA bond. Overall, VCIT has provided higher returns than IUSB over the past ten years.

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

Summary

VCIT IUSB
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Core Total USD Bond Market ETF
Category Corporate Bond N/A
Issuer Vanguard iShares
AUM 48.39B 14.49B
Avg. Return 5.84% 4.13%
Div. Yield 2.33% 2.1%
Expense Ratio 0.05% 0.06%

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 Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.

VCIT’s dividend yield is 0.23% higher than that of IUSB (2.33% vs. 2.1%). Also, VCIT yielded on average 1.71% more per year over the past decade (5.84% vs. 4.13%). The expense ratio of VCIT is 0.01 percentage points lower than IUSB’s (0.05% vs. 0.06%).

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.

IUSB - Holdings

IUSB Bond Sectors Weight
AAA 58.32%
BBB 16.98%
A 12.27%
BB 4.33%
AA 3.36%
B 2.8%
Others 1.01%
Below B 0.92%
US Government 0.0%

IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.

Risk Analysis

VCIT IUSB
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 Alpha of 0.89 with a Mean Return of 0.44 and a Standard Deviation of 5.08. Its R-squared is 63.18 while VCIT’s Beta is 1.35. Furthermore, the fund has a Treynor Ratio of 3.43 and a Sharpe Ratio of 0.91.

The iShares Core Total USD Bond Market ETF (IUSB) has a Sharpe Ratio of 0 with a Alpha of 0 and a R-squared of 0. Its Treynor Ratio is 0 while IUSB’s Standard Deviation is 0. Furthermore, the fund has a Beta of 0 and a Mean Return of 0.

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

Performance

Annual Returns

VCIT vs. IUSB - Annual Returns

Year VCIT IUSB
2020 9.55% 7.59%
2019 13.97% 9.26%
2018 -1.75% -0.38%
2017 5.5% 4.06%
2016 5.3% 3.78%
2015 0.88% 0.46%
2014 7.47% 0.0%
2013 -1.8% 0.0%
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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.

Portfolio Growth

VCIT vs. IUSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $13,747 5.84%
IUSB $10,000 $12,704 4.13%

A $10,000 investment in VCIT would have resulted in a final balance of $13,747. This is a profit of $3,747 over 6 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.

VCIT’s CAGR is 1.71 percentage points higher than that of IUSB and as a result, would have yielded $1,043 more on a $10,000 investment. Thus, VCIT outperformed IUSB by 1.71% annually.


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