The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between HYG and EFV? And which fund is better?
The expense ratio of HYG is 0.09 percentage points higher than EFV’s (0.48% vs. 0.39%). HYG is mostly comprised of BB bonds while EFV has a high exposure to the financial services sector. Overall, HYG has provided higher returns than EFV over the past 11 years.
In this article, we’ll compare HYG vs. EFV. We’ll look at annual returns and fund composition, as well as at their industry exposure and holdings. Moreover, I’ll also discuss HYG’s and EFV’s performance, risk metrics, and portfolio growth and examine how these affect their overall returns.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
Summary
| HYG | EFV | |
| Name | iShares iBoxx $ High Yield Corporate Bond ETF | iShares MSCI EAFE Value ETF |
| Category | High Yield Bond | Foreign Large Value |
| Issuer | iShares | iShares |
| AUM | 20.03B | 14.37B |
| Avg. Return | 6.42% | 3.99% |
| Div. Yield | 4.44% | 2.94% |
| Expense Ratio | 0.48% | 0.39% |
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 EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.
HYG’s dividend yield is 1.50% higher than that of EFV (4.44% vs. 2.94%). Also, HYG yielded on average 2.42% more per year over the past decade (6.42% vs. 3.99%). The expense ratio of HYG is 0.09 percentage points higher than EFV’s (0.48% vs. 0.39%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
Fund Composition
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.
| EFV Holdings | Weight |
| Novartis AG | 2.41% |
| Toyota Motor Corp | 2.21% |
| Commonwealth Bank of Australia | 1.59% |
| Siemens AG | 1.45% |
| Sanofi SA | 1.42% |
| HSBC Holdings PLC | 1.4% |
| TotalEnergies SE | 1.35% |
| Allianz SE | 1.23% |
| GlaxoSmithKline PLC | 1.18% |
| Rio Tinto PLC | 1.1% |
EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.
HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.
Risk Analysis
| HYG | EFV | |
| Mean Return | 0.46 | 0.42 |
| R-squared | 4.1 | 92.15 |
| Std. Deviation | 6.96 | 16.53 |
| Alpha | 3.58 | -1.77 |
| Beta | 0.48 | 1.05 |
| Sharpe Ratio | 0.7 | 0.26 |
| Treynor Ratio | 10.01 | 2.92 |
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a Beta of 0.48 and a Sharpe Ratio of 0.7. Its R-squared is 4.1 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Alpha of 3.58 and a Mean Return of 0.46.
The iShares MSCI EAFE Value ETF (EFV) has a Treynor Ratio of 2.92 with a Mean Return of 0.42 and a R-squared of 92.15. Its Alpha is -1.77 while EFV’s Standard Deviation is 16.53. Furthermore, the fund has a Sharpe Ratio of 0.26 and a Beta of 1.05.
HYG’s Mean Return is 0.04 points higher than that of EFV and its R-squared is 88.05 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than EFV. The Alpha and Beta of HYG are 5.35 points higher and 0.57 points lower than EFV’s Alpha and Beta.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
Performance
Annual Returns
| Year | HYG | EFV |
| 2020 | 4.12% | -2.78% |
| 2019 | 14.23% | 15.97% |
| 2018 | -1.93% | -14.88% |
| 2017 | 6.09% | 21.22% |
| 2016 | 13.92% | 4.87% |
| 2015 | -5.55% | -5.89% |
| 2014 | 2.0% | -5.65% |
| 2013 | 5.9% | 22.61% |
| 2012 | 13.83% | 17.52% |
| 2011 | 5.89% | -12.24% |
| 2010 | 12.07% | 3.18% |
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 EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| HYG | $10,000 | $19,427 | 6.42% |
| EFV | $10,000 | $14,134 | 3.99% |
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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.
HYG’s CAGR is 2.42 percentage points higher than that of EFV and as a result, would have yielded $5,293 more on a $10,000 investment. Thus, HYG outperformed EFV by 2.42% annually.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
