The iShares MSCI EAFE ETF (EFA) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between EFA and HYG? And which fund is better?
The expense ratio of EFA is 0.16 percentage points lower than HYG’s (0.32% vs. 0.48%). EFA also has a high exposure to the financial services sector while HYG is mostly comprised of BB bonds. Overall, EFA has provided higher returns than HYG over the past ten years.
In this article, we’ll compare EFA vs. HYG. We’ll look at fund composition and portfolio growth, as well as at their risk metrics and performance. Moreover, I’ll also discuss EFA’s and HYG’s annual returns, industry exposure, and holdings and examine how these affect their overall returns.
|Name||iShares MSCI EAFE ETF||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Foreign Large Blend||High Yield Bond|
The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
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%.
EFA’s dividend yield is 2.16% lower than that of HYG (2.28% vs. 4.44%). Also, EFA yielded on average 0.05% more per year over the past decade (6.47% vs. 6.42%). The expense ratio of EFA is 0.16 percentage points lower than HYG’s (0.32% vs. 0.48%).
|ASML Holding NV||1.69%|
|Roche Holding AG||1.55%|
|LVMH Moet Hennessy Louis Vuitton SE||1.28%|
|Toyota Motor Corp||1.09%|
|AIA Group Ltd||0.88%|
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
|HYG Bond Sectors||Weight|
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.
The iShares MSCI EAFE ETF (EFA) has a Beta of 0.98 with a Mean Return of 0.57 and a Treynor Ratio of 5.33. Its Standard Deviation is 15.01 while EFA’s Sharpe Ratio is 0.41. Furthermore, the fund has a Alpha of 0.47 and a R-squared of 96.78.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Beta of 0.48 with a Alpha of 3.58 and a R-squared of 4.1. Its Standard Deviation is 6.96 while HYG’s Sharpe Ratio is 0.7. Furthermore, the fund has a Treynor Ratio of 10.01 and a Mean Return of 0.46.
EFA’s Mean Return is 0.11 points higher than that of HYG and its R-squared is 92.68 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than HYG. The Alpha and Beta of EFA are 3.11 points lower and 0.50 points higher than HYG’s Alpha and Beta.
EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EFA would have resulted in a final balance of $18,269. This is a profit of $8,269 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
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%.
EFA’s CAGR is 0.05 percentage points higher than that of HYG and as a result, would have yielded $1,158 less on a $10,000 investment. Thus, EFA outperformed HYG by 0.05% annually.
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