The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and IEF is a iShares Long Government fund. So, what’s the difference between HYG and IEF? And which fund is better?
The expense ratio of HYG is 0.33 percentage points higher than IEF’s (0.48% vs. 0.15%). HYG is mostly comprised of BB bonds and IEF has a high exposure to AAA bond. Overall, HYG has provided higher returns than IEF over the past 11 years.
In this article, we’ll compare HYG vs. IEF. We’ll look at holdings and portfolio growth, as well as at their performance and fund composition. Moreover, I’ll also discuss HYG’s and IEF’s industry exposure, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||iShares iBoxx $ High Yield Corporate Bond ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||High Yield Bond||Long Government|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
HYG’s dividend yield is 3.60% higher than that of IEF (4.44% vs. 0.84%). Also, HYG yielded on average 1.35% more per year over the past decade (6.42% vs. 5.06%). The expense ratio of HYG is 0.33 percentage points higher than IEF’s (0.48% vs. 0.15%).
|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.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a Sharpe Ratio of 0.7 and a R-squared of 4.1. Its Beta is 0.48 while HYG’s Standard Deviation is 6.96. Furthermore, the fund has a Treynor Ratio of 10.01 and a Mean Return of 0.46.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Alpha of -1.2 and a Standard Deviation of 5.42. Its Sharpe Ratio is 0.6 while IEF’s R-squared is 77.56. Furthermore, the fund has a Beta of 1.59 and a Mean Return of 0.32.
HYG’s Mean Return is 0.14 points higher than that of IEF and its R-squared is 73.46 points lower. With a Standard Deviation of 6.96, HYG is slightly more volatile than IEF. The Alpha and Beta of HYG are 4.78 points higher and 1.11 points lower than IEF’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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% 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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
HYG’s CAGR is 1.35 percentage points higher than that of IEF and as a result, would have yielded $2,491 more on a $10,000 investment. Thus, HYG outperformed IEF by 1.35% annually.
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