Total Bond Market ETFs Battle For Inflows: AGG vs. BND

by on April 16, 2013 | ETFs Mentioned:

Total bond market ETFs have found their way into countless portfolios as they offer unparalleled simplicity and cost-efficiency for investors looking to gain broad, diversified fixed income exposure. Through the purchase of a single ticker, investors can beef up their portfolios’ current return all the while tapping into the major segments of the bond market, including government Treasuries and corporate debt [see 101 High Yielding ETFs For Every Dividend Investor].

While there are over a dozen offerings in the Total Bond Market ETFdb Category, two funds remain safely atop the list: the Vanguard Total Bond Market ETF (BND, A) and the iShares Core Total U.S. Bond Market ETF (AGG, A+).

Meet the Competitors

Among the Total Bond Market ETFs currently available on the market, AGG and BND separate themselves by being the biggest funds in the space, boasting over $15 billion and $18 billion in total assets under management, respectively. Although these products are seemingly identical, as each one tracks the performance of the U.S. investment grade bond market, the difference in inflows is a bit surprising when considering their age difference [try our Free ETF Head-To-Head Comparison Tool].

The Bottom Line

For the past several years AGG trumped BND in terms of total assets under management as the iShares fund enjoyed a huge head start, having launched near the end of 2003 versus the Vanguard ETF, which didn’t launch until early 2007. Furthermore, AGG used to be the more expensive of the two ETFs, but recent changes in the iShares “Core” lineup cut its price tag down to 0.08% compared to BND’s cost of 0.10%. Nonetheless, BND has been able to surpass the veteran in recent years in terms of inflows, and ultimately assets under management, showcasing the stiff compeition and rather unpredictable nature of ETF rivalries [see Better-Than-AGG Total Bond Market ETFdb Portfolio].

While these two portfolios are generally the same, investors still need to do their homework and look under the hood before establishing a position; for instance, those looking to minimize costs should not only consider the funds’ expense fee, but also where it may be available for commission-free trading.

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Disclosure: No positions at time of writing.