HYG vs. EMB: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between HYG and EMB? And which fund is better?

The expense ratio of HYG is 0.09 percentage points higher than EMB’s (0.48% vs. 0.39%). HYG is mostly comprised of BB bonds and EMB has a high exposure to BBB bond. Overall, HYG has provided lower returns than EMB over the past 11 years.

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

Summary

HYG EMB
Name iShares iBoxx $ High Yield Corporate Bond ETF iShares J.P. Morgan USD Emerging Markets Bond ETF
Category High Yield Bond Emerging Markets Bond
Issuer iShares iShares
AUM 20.03B 19.76B
Avg. Return 6.42% 6.43%
Div. Yield 4.44% 3.85%
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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

HYG’s dividend yield is 0.59% higher than that of EMB (4.44% vs. 3.85%). Also, HYG yielded on average 0.02% less per year over the past decade (6.42% vs. 6.43%). The expense ratio of HYG is 0.09 percentage points higher than EMB’s (0.48% vs. 0.39%).

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Fund Composition

Holdings

HYG - 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.

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

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Risk Analysis

HYG EMB
Mean Return 0.46 0.44
R-squared 4.1 23.34
Std. Deviation 6.96 8.44
Alpha 3.58 0.89
Beta 0.48 1.36
Sharpe Ratio 0.7 0.55
Treynor Ratio 10.01 3.24

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 Standard Deviation is 6.96 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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a R-squared of 23.34 with a Mean Return of 0.44 and a Sharpe Ratio of 0.55. Its Standard Deviation is 8.44 while EMB’s Alpha is 0.89. Furthermore, the fund has a Beta of 1.36 and a Treynor Ratio of 3.24.

HYG’s Mean Return is 0.02 points higher than that of EMB and its R-squared is 19.24 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than EMB. The Alpha and Beta of HYG are 2.69 points higher and 0.88 points lower than EMB’s Alpha and Beta.

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Performance

Annual Returns

HYG vs. EMB - Annual Returns

Year HYG EMB
2020 4.12% 5.48%
2019 14.23% 15.57%
2018 -1.93% -5.67%
2017 6.09% 9.98%
2016 13.92% 9.41%
2015 -5.55% 0.43%
2014 2.0% 6.69%
2013 5.9% -7.42%
2012 13.83% 17.64%
2011 5.89% 7.2%
2010 12.07% 11.47%

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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

HYG vs. EMB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
HYG $10,000 $19,427 6.42%
EMB $10,000 $19,295 6.43%

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 EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.

HYG’s CAGR is 0.02 percentage points lower than that of EMB and as a result, would have yielded $132 more on a $10,000 investment. Thus, HYG performed worse than EMB by 0.02% annually.


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