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VCSH vs. MBB: What’s The Difference?

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

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VCSHMBB
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares MBS ETF
CategoryShort-Term BondIntermediate Government
IssuerVanguardiShares
AUM47.88B25.69B
Avg. Return3.12%3.08%
Div. Yield1.89%1.88%
Expense Ratio0.05%0.06%

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.05%.

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%.

VCSH’s dividend yield is 0.01% higher than that of MBB (1.89% vs. 1.88%). Also, VCSH yielded on average 0.04% more per year over the past decade (3.12% vs. 3.08%). The expense ratio of VCSH is 0.01 percentage points lower than MBB’s (0.05% vs. 0.06%).

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Fund Composition

Holdings

VCSH - Holdings

VCSH Bond SectorsWeight
BBB47.49%
A43.06%
AA8.45%
AAA0.95%
Below B0.03%
Others0.02%
B0.0%
BB0.0%
US Government0.0%

VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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

VCSHMBB
Mean Return0.240.2
R-squared37.5374.38
Std. Deviation2.342.12
Alpha0.930.14
Beta0.480.6
Sharpe Ratio0.970.87
Treynor Ratio4.753.02

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Standard Deviation of 2.34 with a Treynor Ratio of 4.75 and a Beta of 0.48. Its Alpha is 0.93 while VCSH’s Sharpe Ratio is 0.97. Furthermore, the fund has a Mean Return of 0.24 and a R-squared of 37.53.

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

VCSH’s Mean Return is 0.04 points higher than that of MBB and its R-squared is 36.85 points lower. With a Standard Deviation of 2.34, VCSH is slightly more volatile than MBB. The Alpha and Beta of VCSH are 0.79 points higher and 0.12 points lower than MBB’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. MBB - Annual Returns

YearVCSHMBB
20205.08%4.03%
20196.85%6.27%
20180.91%0.81%
20172.45%2.37%
20162.63%1.28%
20151.25%1.28%
20141.96%6.16%
20131.37%-1.92%
20125.74%2.23%
20112.94%5.88%
20105.51%5.44%

VCSH had its best year in 2019 with an annual return of 6.85%. VCSH’s worst year over the past decade yielded 0.91% and occurred in 2018. In most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 2.45%, 2.63%, and 2.94% 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

VCSH vs. MBB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
MBB$10,000$13,1893.08%

A $10,000 investment in VCSH would have resulted in a final balance of $13,569. This is a profit of $3,569 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

With a $10,000 investment in MBB, the end total would have been $13,189. This equates to a $3,189 profit over 10 years and a compound annual growth rate (CAGR) of 3.08%.

VCSH’s CAGR is 0.04 percentage points higher than that of MBB and as a result, would have yielded $380 more on a $10,000 investment. Thus, VCSH outperformed MBB by 0.04% annually.


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