Choosing Between Two Investment-Grade Bond ETFs: Which Fits Your Market Profile?

Portfolio Composition: Where Diversification Meets Selectivity

The iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB) and Vanguard Intermediate-Term Corporate Bond ETF (VCIT) both target the same market segment—intermediate-term, investment-grade U.S. corporate debt—yet their approaches to building portfolios diverge significantly. Understanding these differences is critical for investors navigating today’s credit environment.

IGIB operates as a market-wide corporate bond tracker with an expansive reach. The fund maintains approximately 3,000 individual bond positions and has an 19-year track record of performance. This breadth creates a notably different market profile compared to its competitor. Cash and short-term instruments dominate its sector allocation, with substantial positions including Blk Csh Fnd Treasury Sl Agency (0.51%), Usd Cash (0.24%), and Bank Of America Corp Mtn (0.21%). The absence of pronounced sector tilts makes IGIB function as a straightforward core holding for those seeking genuine market-wide exposure across the five-to-ten-year maturity spectrum.

VCIT takes a more concentrated approach with just 343 holdings, reflecting deliberately selected credit decisions. The fund’s market profile leans decidedly toward Financial Services (28% allocation), supplemented by Cash & Others (12%) and Technology (9%). Top holdings reveal this selective positioning: Meta Platforms (0.31%), Bank of America (0.28%), and JPMorgan Chase (0.26%). Notably, VCIT applies an ESG screen when constructing its portfolio, a filter that fundamentally shapes which issuers and sectors gain access to investor capital.

Cost, Yield, and Recent Performance

VCIT maintains a slight cost advantage with a 0.03% expense ratio versus IGIB’s 0.04%, though the difference is negligible for most investors. The more meaningful distinction emerges in yield and recent returns. As of December 18, 2025, VCIT delivered a 7.41% one-year total return paired with a 4.52% dividend yield. IGIB counters with a marginally superior 7.66% return and a 4.49% yield, making it the better choice for growth-focused investors over the past 12 months.

Over the longer five-year horizon, the comparison tightens further. IGIB generated $881 from an initial $1,000 investment, while VCIT produced $864—a difference attributable more to market-wide timing than to fundamental structural advantages. Both funds posted nearly identical maximum drawdowns of approximately -20.6%, indicating comparable resilience during credit stress.

Price volatility, measured via beta, slightly favors IGIB at 1.08 versus VCIT’s 1.10, suggesting marginally lower price swings relative to broader market movements. This difference, though small, may matter to investors prioritizing stability over capital appreciation.

Understanding the Trade-offs

When credit spreads widen and market-wide dispersion returns, portfolio composition becomes far more consequential. IGIB’s vast holdings create a natural dampening effect—individual issuer problems or sector dislocations struggle to meaningfully impact fund performance because no single position wields material weight. Returns tend to cluster around market averages, offering predictability at the cost of upside surprise.

VCIT’s concentrated portfolio creates a different dynamic. With fewer bonds and clearer fingerprints across sectors, the fund’s credit opinions become more visible when market conditions deteriorate. The Financial Services tilt and ESG screen, while sensible strategies in benign environments, can create friction during periods of credit stress or rapid market repricing. Investors get more control over their credit exposure but also bear more visibility to concentrated risk.

Size and Market Position

Asset under management reveals scale differences worth noting. VCIT manages $61.1 billion, making it one of the market’s largest intermediate-term corporate bond vehicles. IGIB, while substantially smaller at $17.1 billion in AUM, still commands sufficient scale to provide operational efficiency and competitive spreads in the secondary bond market.

Making Your Decision

The real question isn’t which fund is “better,” but rather which aligns with your investment philosophy and market outlook. Investors seeking true diversification and market-wide exposure—those comfortable tracking the broader investment-grade corporate bond market—should gravitate toward IGIB’s expansive holdings. The slightly higher expense ratio becomes meaningless when exposure is genuinely comprehensive.

Conversely, investors with stronger convictions about specific sectors or credit decisions, particularly those aligned with ESG principles, may prefer VCIT’s more selective market profile. The fund’s concentrated holdings allow your credit thesis to actually influence performance rather than getting swallowed by thousands of offsetting positions.

For those uncertain, IGIB provides the safer harbor—a true market representation that removes guesswork about which issuers and sectors deserve capital. VCIT works best for investors who believe their credit judgment should matter.