VCIT vs. IWR: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares Russell Mid-Cap ETF (IWR) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IWR is a iShares Mid-Cap Blend fund. So, what’s the difference between VCIT and IWR? And which fund is better?

The expense ratio of VCIT is 0.14 percentage points lower than IWR’s (0.05% vs. 0.19%). VCIT is mostly comprised of BBB bonds while IWR has a high exposure to the technology sector. Overall, VCIT has provided lower returns than IWR over the past ten years.

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

Summary

VCIT IWR
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Russell Mid-Cap ETF
Category Corporate Bond Mid-Cap Blend
Issuer Vanguard iShares
AUM 48.39B 29.84B
Avg. Return 5.84% 14.15%
Div. Yield 2.33% 0.99%
Expense Ratio 0.05% 0.19%

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 Russell Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

VCIT’s dividend yield is 1.34% higher than that of IWR (2.33% vs. 0.99%). Also, VCIT yielded on average 8.31% less per year over the past decade (5.84% vs. 14.15%). The expense ratio of VCIT is 0.14 percentage points lower than IWR’s (0.05% vs. 0.19%).

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.

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

Risk Analysis

VCIT IWR
Mean Return 0.44 1.17
R-squared 63.18 91.52
Std. Deviation 5.08 15.66
Alpha 0.89 -2.8
Beta 1.35 1.11
Sharpe Ratio 0.91 0.86
Treynor Ratio 3.43 11.72

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

The iShares Russell Mid-Cap ETF (IWR) has a R-squared of 91.52 with a Beta of 1.11 and a Mean Return of 1.17. Its Treynor Ratio is 11.72 while IWR’s Alpha is -2.8. Furthermore, the fund has a Sharpe Ratio of 0.86 and a Standard Deviation of 15.66.

VCIT’s Mean Return is 0.73 points lower than that of IWR and its R-squared is 28.34 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than IWR. The Alpha and Beta of VCIT are 3.69 points higher and 0.24 points higher than IWR’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. IWR - Annual Returns

Year VCIT IWR
2020 9.55% 16.91%
2019 13.97% 30.31%
2018 -1.75% -9.13%
2017 5.5% 18.32%
2016 5.3% 13.58%
2015 0.88% -2.57%
2014 7.47% 13.03%
2013 -1.8% 34.5%
2012 11.36% 17.13%
2011 7.94% -1.67%
2010 10.65% 25.25%

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 2013 was the strongest year for IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

VCIT vs. IWR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
IWR $10,000 $31,737 14.15%

A $10,000 investment in VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in IWR, the end total would have been $31,737. This equates to a $21,737 profit over 10 years and a compound annual growth rate (CAGR) of 14.15%.

VCIT’s CAGR is 8.31 percentage points lower than that of IWR and as a result, would have yielded $14,298 less on a $10,000 investment. Thus, VCIT performed worse than IWR by 8.31% annually.


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