The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between HYG and DFAC? And which fund is better?
The expense ratio of HYG is 0.29 percentage points higher than DFAC’s (0.48% vs. 0.19%). HYG is mostly comprised of BB bonds while DFAC has a high exposure to the technology sector. Overall, HYG has provided lower returns than DFAC over the past 11 years.
In this article, we’ll compare HYG vs. DFAC. We’ll look at performance and holdings, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss HYG’s and DFAC’s annual returns, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||iShares iBoxx $ High Yield Corporate Bond ETF||Dimensional U.S. Core Equity 2 ETF|
|Category||High Yield Bond||Large Blend|
|Issuer||iShares||Dimensional Fund Advisors|
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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
HYG’s dividend yield is 3.44% higher than that of DFAC (4.44% vs. 1.0%). Also, HYG yielded on average 7.52% less per year over the past decade (6.42% vs. 13.93%). The expense ratio of HYG is 0.29 percentage points higher than DFAC’s (0.48% vs. 0.19%).
|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.
|Johnson & Johnson||1.05%|
|Facebook Inc Class A||1.05%|
|JPMorgan Chase & Co||1.0%|
|Alphabet Inc Class C||0.85%|
|Alphabet Inc Class A||0.84%|
|Berkshire Hathaway Inc Class B||0.75%|
|Visa Inc Class A||0.74%|
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a R-squared of 4.1 with a Sharpe Ratio of 0.7 and a Beta of 0.48. Its Mean Return is 0.46 while HYG’s Standard Deviation is 6.96. Furthermore, the fund has a Treynor Ratio of 10.01 and a Alpha of 3.58.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Standard Deviation of 15.55 with a Sharpe Ratio of 0.88 and a Beta of 1.12. Its Treynor Ratio is 11.85 while DFAC’s Alpha is -2.75. Furthermore, the fund has a R-squared of 95.1 and a Mean Return of 1.19.
HYG’s Mean Return is 0.73 points lower than that of DFAC and its R-squared is 91.00 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than DFAC. The Alpha and Beta of HYG are 6.33 points higher and 0.64 points lower than DFAC’s Alpha and Beta.
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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
HYG’s CAGR is 7.52 percentage points lower than that of DFAC and as a result, would have yielded $19,369 less on a $10,000 investment. Thus, HYG performed worse than DFAC by 7.52% annually.
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