How does Bloomberg Barclays US Aggregate Bond compare to ICE US Treasury Core Bond?

Question

I'm looking at two US aggregate bonds trying to understand why one is more popular than the other.

1. iShares US Aggregate Bond UCITS ETF - 0.25% TER - Bloomberg Barclays
2. iShares US Treasury Bond UCITS ETF - 0.07% TER - ICE US Treasury Core

It seems Bloomberg Barclays ETF is more popular than ICE ETF although it has higher expense ratio. I found this that describes ICE allocation formulas but I can't fully comprehend it. Is there anything inherently wrong with ICE Treasury Core index? How does it compare to Bloomberg Barclays index?

Answer 1

They have different constituents. The ICE US Treasury fund consists of only US Treasuries:

The ICE US Treasury Core Bond index tracks US Treasuries. Time to maturity: At least one year

while the Bloomberg fund consists of treasuries, other gov bonds, and corporate bonds:

The Bloomberg Barclays US Aggregate Bond index tracks USD denominated fixed rate bonds including Treasuries, government-related, securitised and corporate securities. Rating: Investment Grade.

You should expect higher return on average from the Bloomberg fund, but also higher risk (in terms of fluctuations) because of the credit risk of corporate bonds and securitized products (e.g. Mortgage-Backed Securities).

BTW do not go by the fund price to gauge whether a fund is "expensive" or "popular" or not - fund price is largely irrelevant since you can buy fractional units (you can buy 100 EURO of either funds just as easily). What matters is the expected return and the expense ratio.