AGG vs. HYG: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between AGG and HYG? And which fund is better?

The expense ratio of AGG is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%). AGG is mostly comprised of AAA bonds and HYG has a high exposure to BB bond. Overall, AGG has provided lower returns than HYG over the past ten years.

In this article, we’ll compare AGG vs. HYG. We’ll look at performance and annual returns, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss AGG’s and HYG’s fund composition, risk metrics, and industry exposure and examine how these affect their overall returns.

Summary

AGG HYG
Name iShares Core U.S. Aggregate Bond ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Intermediate-Term Bond High Yield Bond
Issuer iShares iShares
AUM 88.8B 20.03B
Avg. Return 4.04% 6.42%
Div. Yield 1.95% 4.44%
Expense Ratio 0.04% 0.48%

The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

AGG’s dividend yield is 2.49% lower than that of HYG (1.95% vs. 4.44%). Also, AGG yielded on average 2.38% less per year over the past decade (4.04% vs. 6.42%). The expense ratio of AGG is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%).

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Fund Composition

Holdings

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

AGG HYG
Mean Return 0.28 0.46
R-squared 99.96 4.1
Std. Deviation 3.03 6.96
Alpha -0.08 3.58
Beta 1.01 0.48
Sharpe Ratio 0.9 0.7
Treynor Ratio 2.7 10.01

The iShares Core U.S. Aggregate Bond ETF (AGG) has a Mean Return of 0.28 with a Standard Deviation of 3.03 and a Beta of 1.01. Its Treynor Ratio is 2.7 while AGG’s Alpha is -0.08. Furthermore, the fund has a R-squared of 99.96 and a Sharpe Ratio of 0.9.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Mean Return of 0.46 with a Alpha of 3.58 and a Beta of 0.48. Its Standard Deviation is 6.96 while HYG’s R-squared is 4.1. Furthermore, the fund has a Treynor Ratio of 10.01 and a Sharpe Ratio of 0.7.

AGG’s Mean Return is 0.18 points lower than that of HYG and its R-squared is 95.86 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than HYG. The Alpha and Beta of AGG are 3.66 points lower and 0.53 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. HYG - Annual Returns

Year AGG HYG
2020 7.42% 4.12%
2019 8.68% 14.23%
2018 -0.05% -1.93%
2017 3.53% 6.09%
2016 2.56% 13.92%
2015 0.48% -5.55%
2014 6.04% 2.0%
2013 -2.15% 5.9%
2012 4.04% 13.83%
2011 7.58% 5.89%
2010 6.3% 12.07%

AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

AGG vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
HYG $10,000 $19,427 6.42%

A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.

AGG’s CAGR is 2.38 percentage points lower than that of HYG and as a result, would have yielded $4,059 less on a $10,000 investment. Thus, AGG performed worse than HYG by 2.38% annually.


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