Long-Term Bond ETF Strategies: Comparing SPLB and LQD for Your Fixed Income Portfolio

When building a corporate bond ETF allocation, investors often face a critical choice between State Street’s SPDR Portfolio Long Term Corporate Bond ETF (SPLB) and iShares’ iBoxx Investment Grade Corporate Bond ETF (LQD). While both funds provide exposure to U.S. investment-grade corporate bonds, they serve distinctly different investor profiles and market conditions.

The Core Distinction: Maturity Strategy

SPLB concentrates exclusively on bonds with maturities of 10 years or longer, resulting in a portfolio of 2,953 holdings with an average fund life of 16.8 years. In contrast, LQD maintains a broader approach, spanning the entire investment-grade maturity spectrum across 3,002 securities. This fundamental difference shapes everything from yield potential to interest rate sensitivity.

LQD’s maturity distribution includes 22.3% of holdings between three and five years, and 16.6% between five and seven years—allocations that SPLB deliberately avoids. This design choice explains why SPLB generates a higher current yield of 5.2% compared to LQD’s 4.34%, but also why it carries significantly greater duration risk.

Cost and Income Trade-offs

From an expense perspective, SPLB presents a compelling case with a 0.04% annual fee versus LQD’s 0.14%—a meaningful 70 basis point advantage. For investors managing substantial positions, this cost differential compounds significantly over time. SPLB’s higher yield further enhances its appeal to income-seeking investors who prioritize current distributions from their bond allocation.

However, the past five years reveal the price of chasing extra yield. A $1,000 investment in SPLB grew to just $686.55, compared to $801.52 in LQD. SPLB experienced a maximum drawdown of 23.31% versus LQD’s 14.7%, illustrating how longer-duration bonds face amplified losses during rising rate environments.

Performance Under Pressure

LQD’s diversified maturity approach proved more resilient during recent market volatility. The fund’s lower beta of 1.4 (versus SPLB’s 2.1) indicates substantially less price fluctuation relative to broader market movements. Recent bond market stress has reinforced this advantage, with LQD’s one-year return of 6.2% outpacing SPLB’s 4.35% performance.

Portfolio Composition and Concentration

Both funds maintain investment-grade quality across their holdings, with some overlap in top positions. SPLB’s largest positions include Meta Platforms’ senior unsecured bonds (5.75% coupon, 0.39% weight), Anheuser Busch InBev’s company-guaranteed notes (0.38% weight), and CVS Health senior unsecured bonds (0.33% weight). LQD’s leading positions include BlackRock’s Treasury cash fund (0.90%), with Anheuser Busch InBev and CVS Health also featuring prominently at lower weights.

SPLB’s concentrated long-duration positioning creates higher sensitivity to interest rate movements—beneficial in a declining-rate environment but punishing when rates rise. LQD’s maturity ladder approach distributes this risk across multiple duration buckets.

Choosing Between the Two

LQD’s $33.17 billion in assets under management dwarfs SPLB’s $1.1 billion, reflecting institutional confidence in its balanced approach. LQD suits investors prioritizing stability and long-term capital preservation over maximum current income. SPLB appeals to investors with lower rate expectations or those seeking maximum yield, willing to tolerate higher volatility.

Neither fund is inherently “better”—the choice depends on your interest rate outlook, risk tolerance, and income requirements. For conservative investors uncomfortable with double-digit drawdowns, LQD’s steadier performance justifies its slightly higher fees. For those with extended time horizons and high conviction about rates, SPLB’s superior yield and lower costs warrant consideration despite recent underperformance.

Understanding the mechanics of corporate bond etfs remains essential before committing capital to either strategy.