VEU vs. IGSB: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VEU and IGSB? And which fund is better?

The expense ratio of VEU is 0.02 percentage points higher than IGSB’s (0.08% vs. 0.06%). VEU also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, VEU has provided higher returns than IGSB over the past ten years.

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

Summary

VEU IGSB
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares 1-5 Year Investment Grade Corporate Bond ETF
Category Foreign Large Blend Short-Term Bond
Issuer Vanguard iShares
AUM 53.64B 26.63B
Avg. Return 6.64% 2.51%
Div. Yield 2.31% 2.02%
Expense Ratio 0.08% 0.06%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

VEU’s dividend yield is 0.29% higher than that of IGSB (2.31% vs. 2.02%). Also, VEU yielded on average 4.13% more per year over the past decade (6.64% vs. 2.51%). The expense ratio of VEU is 0.02 percentage points higher than IGSB’s (0.08% vs. 0.06%).

Fund Composition

Holdings

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

VEU IGSB
Mean Return 0.56 0.19
R-squared 98.44 26.13
Std. Deviation 15.08 2
Alpha 0.28 0.69
Beta 0.99 0.34
Sharpe Ratio 0.4 0.82
Treynor Ratio 5.12 4.82

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Mean Return of 0.56 with a Alpha of 0.28 and a Sharpe Ratio of 0.4. Its Beta is 0.99 while VEU’s Standard Deviation is 15.08. Furthermore, the fund has a R-squared of 98.44 and a Treynor Ratio of 5.12.

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a R-squared of 26.13 with a Standard Deviation of 2 and a Beta of 0.34. Its Mean Return is 0.19 while IGSB’s Treynor Ratio is 4.82. Furthermore, the fund has a Alpha of 0.69 and a Sharpe Ratio of 0.82.

VEU’s Mean Return is 0.37 points higher than that of IGSB and its R-squared is 72.31 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than IGSB. The Alpha and Beta of VEU are 0.41 points lower and 0.65 points higher than IGSB’s Alpha and Beta.

Performance

Annual Returns

VEU vs. IGSB - Annual Returns

Year VEU IGSB
2020 11.39% 5.26%
2019 21.63% 7.01%
2018 -13.97% 1.34%
2017 27.27% 1.41%
2016 4.77% 1.77%
2015 -4.67% 0.7%
2014 -4.05% 0.74%
2013 14.5% 1.03%
2012 18.55% 3.28%
2011 -14.25% 1.34%
2010 11.85% 3.69%

VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% respectively.

The year 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

VEU vs. IGSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
IGSB $10,000 $13,103 2.51%

A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.

VEU’s CAGR is 4.13 percentage points higher than that of IGSB and as a result, would have yielded $5,404 more on a $10,000 investment. Thus, VEU outperformed IGSB by 4.13% annually.


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