TBG Loves BX

A reader left a comment on yesterday's post about navigating a lost decade for stocks using the TBG Dividend Growth ETF (TBG). Yesterday was part 2, here's part 1. The portfolio we looked at in part two as follows; 

In part one we just put 25% in SCHD but yesterday we updated it to include IQLT and AIQ. IQLT in foreign quality stocks (owning foreign if domestic does poorly makes sense) and AIQ is a nod to a paper from Goldman Sachs that said not to completely abandon innovation (the AI theme).

The idea of using SCHD (and then adding IQLT) was simply to avoid market cap weighting which by definition would do relatively poorly in a lost decade for stocks and focus on more dividend, quality or valueish factors. The buyback ETF PKW and Cambria's shareholder yield funds might have a seat at that table too. 

So what is TBG? It is an actively managed, concentrated portfolio of stock picks and SCHD tracks an index and is much cheaper.

TBG's stats range from just slightly better than SCHD, like the CAGR, to noticeably better like it's Sharpe Ratio. This is a little surprising given that hot potato Blackstone is the largest holding in TBG and has been since the fund's inception. Parsing Gemini's explanation, TBG might be trying to optimize its portfolio by having holdings that offset the volatility contributed by BX. BX is currently in a pretty big drawdown so TBG has lagged SCHD in 2026 so far by about 900 basis points. Portfoliolabs has a pretty good comparison of the two funds.

Grok says 8-15 (yeah that's vague) of TBG's 36 holdings are in growth indexes versus 5-20 out of SCHD's 103 holdings. In trying to answer the reader's question, TBG appears to be growthier than SCHD so that fact could work against it in our lost decade premise slightly. Interestingly, BX has a 2.55% weighting in SCHD. It does have some yield to go along with its volatility. 

TBG's track record is short but despite what the chart shows, there is a good bit of differentiation from year to year between it and SCHD.

TBG went down a little less than SCHD in the Tariff Panic of 2025 but it went down a little more than SCHD when we attacked Iran. Over the long term, TBG could certainly turn out to be the better mousetrap but my hunch is that its growthiness would be a bit of a headwind if there ends up being a lost decade for equities. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.