The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between BSV and HYG? And which fund is better?
The expense ratio of BSV is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%). BSV is mostly comprised of AAA bonds and HYG has a high exposure to BB bond. Overall, BSV has provided lower returns than HYG over the past ten years.
In this article, we’ll compare BSV vs. HYG. We’ll look at performance and industry exposure, as well as at their holdings and fund composition. Moreover, I’ll also discuss BSV’s and HYG’s portfolio growth, annual returns, and risk metrics and examine how these affect their overall returns.
Summary
| BSV | HYG | |
| Name | Vanguard Short-Term Bond Index Fund ETF Shares | iShares iBoxx $ High Yield Corporate Bond ETF |
| Category | Short-Term Bond | High Yield Bond |
| Issuer | Vanguard | iShares |
| AUM | 67.71B | 20.03B |
| Avg. Return | 2.27% | 6.42% |
| Div. Yield | 1.48% | 4.44% |
| Expense Ratio | 0.05% | 0.48% |
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.
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%.
BSV’s dividend yield is 2.96% lower than that of HYG (1.48% vs. 4.44%). Also, BSV yielded on average 4.14% less per year over the past decade (2.27% vs. 6.42%). The expense ratio of BSV is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%).
Fund Composition
Holdings
| BSV Bond Sectors | Weight |
| AAA | 71.65% |
| BBB | 13.08% |
| A | 11.95% |
| AA | 3.28% |
| Others | 0.03% |
| Below B | 0.01% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.
| 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.
Risk Analysis
| BSV | HYG | |
| Mean Return | 0.16 | 0.46 |
| R-squared | 78.38 | 4.1 |
| Std. Deviation | 1.33 | 6.96 |
| Alpha | 0.21 | 3.58 |
| Beta | 0.38 | 0.48 |
| Sharpe Ratio | 0.98 | 0.7 |
| Treynor Ratio | 3.33 | 10.01 |
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Beta of 0.38 with a R-squared of 78.38 and a Alpha of 0.21. Its Standard Deviation is 1.33 while BSV’s Mean Return is 0.16. Furthermore, the fund has a Treynor Ratio of 3.33 and a Sharpe Ratio of 0.98.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Sharpe Ratio of 0.7 with a Standard Deviation of 6.96 and a R-squared of 4.1. Its Beta is 0.48 while HYG’s Alpha is 3.58. Furthermore, the fund has a Mean Return of 0.46 and a Treynor Ratio of 10.01.
BSV’s Mean Return is 0.30 points lower than that of HYG and its R-squared is 74.28 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than HYG. The Alpha and Beta of BSV are 3.37 points lower and 0.10 points lower than HYG’s Alpha and Beta.
Performance
Annual Returns
| Year | BSV | HYG |
| 2020 | 4.67% | 4.12% |
| 2019 | 4.92% | 14.23% |
| 2018 | 1.34% | -1.93% |
| 2017 | 1.2% | 6.09% |
| 2016 | 1.42% | 13.92% |
| 2015 | 0.92% | -5.55% |
| 2014 | 1.32% | 2.0% |
| 2013 | 0.17% | 5.9% |
| 2012 | 1.98% | 13.83% |
| 2011 | 3.04% | 5.89% |
| 2010 | 4.0% | 12.07% |
BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% 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
| Fund | Initial Balance | Final Balance | CAGR |
| BSV | $10,000 | $12,785 | 2.27% |
| HYG | $10,000 | $19,427 | 6.42% |
A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.
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%.
BSV’s CAGR is 4.14 percentage points lower than that of HYG and as a result, would have yielded $6,642 less on a $10,000 investment. Thus, BSV performed worse than HYG by 4.14% annually.
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