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HYG vs. ACWI: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and ACWI is a iShares N/A fund. So, what’s the difference between HYG and ACWI? And which fund is better?

The expense ratio of HYG is 0.16 percentage points higher than ACWI’s (0.48% vs. 0.32%). HYG is mostly comprised of BB bonds while ACWI has a high exposure to the technology sector. Overall, HYG has provided lower returns than ACWI over the past 11 years.

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

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Summary

HYGACWI
NameiShares iBoxx $ High Yield Corporate Bond ETFiShares MSCI ACWI ETF
CategoryHigh Yield BondN/A
IssueriSharesiShares
AUM20.03B16.85B
Avg. Return6.42%10.21%
Div. Yield4.44%1.39%
Expense Ratio0.48%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%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

HYG’s dividend yield is 3.05% higher than that of ACWI (4.44% vs. 1.39%). Also, HYG yielded on average 3.80% less per year over the past decade (6.42% vs. 10.21%). The expense ratio of HYG is 0.16 percentage points higher than ACWI’s (0.48% vs. 0.32%).

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Fund Composition

Holdings

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
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.

ACWI - Holdings

ACWI HoldingsWeight
Apple Inc3.44%
Microsoft Corp2.91%
Amazon.com Inc2.21%
Facebook Inc A1.25%
Alphabet Inc Class C1.12%
Alphabet Inc A1.09%
Taiwan Semiconductor Manufacturing Co Ltd0.79%
Tesla Inc0.78%
NVIDIA Corp0.74%
JPMorgan Chase & Co0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

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Risk Analysis

HYGACWI
Mean Return0.460.89
R-squared4.199.96
Std. Deviation6.9614.05
Alpha3.580.15
Beta0.481
Sharpe Ratio0.70.71
Treynor Ratio10.019.45

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

The iShares MSCI ACWI ETF (ACWI) has a Sharpe Ratio of 0.71 with a Mean Return of 0.89 and a Standard Deviation of 14.05. Its Beta is 1 while ACWI’s Alpha is 0.15. Furthermore, the fund has a Treynor Ratio of 9.45 and a R-squared of 99.96.

HYG’s Mean Return is 0.43 points lower than that of ACWI and its R-squared is 95.86 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than ACWI. The Alpha and Beta of HYG are 3.43 points higher and 0.52 points lower than ACWI’s Alpha and Beta.

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Performance

Annual Returns

HYG vs. ACWI - Annual Returns

YearHYGACWI
20204.12%16.38%
201914.23%26.7%
2018-1.93%-9.15%
20176.09%24.35%
201613.92%8.22%
2015-5.55%-2.39%
20142.0%4.64%
20135.9%22.91%
201213.83%15.99%
20115.89%-7.6%
201012.07%12.31%

HYG had its best year in 2019 with an annual return of 14.23%. HYG’s worst year over the past decade yielded -5.55% and occurred in 2015. In most years the iShares iBoxx $ High Yield Corporate Bond ETF provided moderate returns such as in 2011, 2013, and 2017 where annual returns amounted to 5.89%, 5.9%, and 6.09% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

HYG vs. ACWI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
HYG$10,000$19,4276.42%
ACWI$10,000$27,24110.21%

A $10,000 investment in HYG would have resulted in a final balance of $19,427. This is a profit of $9,427 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.42%.

With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.

HYG’s CAGR is 3.80 percentage points lower than that of ACWI and as a result, would have yielded $7,814 less on a $10,000 investment. Thus, HYG performed worse than ACWI by 3.80% annually.


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