Corporate Bonds via ETF: Why Long-Term Maturity Focus Matters for Your Portfolio Returns

The Real Performance Story: Why One Fund Pulled Back Harder

When comparing SPLB and LQD, the numbers tell an interesting tale. Over the past five years, SPLB experienced a maximum drawdown of 23.31%, significantly steeper than LQD’s 14.7% decline. This gap translates directly to investor outcomes: a $1,000 investment in SPLB grew to just $686.55 over five years, while the same amount in LQD reached $801.52. The culprit? Strategy differences in how these funds structure their corporate bond portfolios.

Understanding the Fee & Yield Trade-Off

SPLB charges only 0.04% annually—three times cheaper than LQD’s 0.14% expense ratio. This cost advantage combines with a higher dividend yield of 5.2% versus LQD’s 4.34%, making SPLB superficially attractive for yield-focused investors. However, the story becomes more nuanced when you factor in the longer-term volatility. SPLB’s one-year return stood at 4.35% compared to LQD’s 6.2%, suggesting that lower fees don’t always compensate for deeper market drawdowns in fixed income investing.

The Maturity Mismatch: Where These Corporate Bond Funds Diverge

Both funds target U.S. investment-grade corporate bonds, but they employ fundamentally different approaches:

SPLB’s concentrated strategy locks into bonds with 10+ year maturities, creating a portfolio of 2,953 holdings with an average fund duration of 16.8 years. This positioning increases sensitivity to interest rate movements—a concept measured by beta. SPLB’s beta of 2.1 (relative to the S&P 500) reflects this elevated volatility compared to LQD’s beta of 1.4.

LQD’s diversified maturity approach spans the entire investment-grade spectrum. Approximately 22.3% of holdings mature within 3-5 years, while 16.6% fall in the 5-7 year range. This deliberate mix of shorter and longer-term corporate bond positions helped LQD absorb recent market stress more effectively, particularly during periods when the Federal Reserve adjusted interest rate policy.

Inside the Fund Holdings: Similar Core, Different Edges

Both ETFs maintain substantial asset bases, though with markedly different scales. LQD commands $33.17 billion in assets under management, while SPLB manages $1.1 billion. Their top corporate bond positions overlap—Meta Platforms, Anheuser Busch InBev, and CVS Health appear in both portfolios—yet the weight and composition differ. SPLB’s positioning in longer-dated Meta Platforms bonds (maturing 2065, yielding 5.75%) versus LQD’s broader Treasury-adjacent allocations showcases their structural divergence.

What This Means for Your Fixed Income Strategy

For income-focused investors: SPLB’s 5.2% yield and lower expense ratio present appealing economics, provided you can tolerate the higher volatility associated with extended-maturity corporate bond exposure.

For stability-conscious investors: LQD’s broader maturity profile, lower beta, and superior five-year total returns justify its higher 0.14% fee. The fund’s balanced approach to corporate bonds across different time horizons created a smoother ride through recent market turbulence.

The choice ultimately hinges on your risk tolerance, investment timeline, and income requirements. Investors comfortable holding corporate bonds through interest rate cycles may find SPLB’s cost advantage compelling. Those prioritizing capital preservation and steady returns should consider LQD’s proven resilience in volatile markets.