The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and IWN is a iShares Small Value fund. So, what’s the difference between HYG and IWN? And which fund is better?
The expense ratio of HYG is 0.24 percentage points higher than IWN’s (0.48% vs. 0.24%). HYG is mostly comprised of BB bonds while IWN has a high exposure to the financial services sector. Overall, HYG has provided lower returns than IWN over the past 11 years.
In this article, we’ll compare HYG vs. IWN. We’ll look at holdings and industry exposure, as well as at their performance and fund composition. Moreover, I’ll also discuss HYG’s and IWN’s portfolio growth, annual returns, and risk metrics and examine how these affect their overall returns.
|Name||iShares iBoxx $ High Yield Corporate Bond ETF||iShares Russell 2000 Value ETF|
|Category||High Yield Bond||Small Value|
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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.
HYG’s dividend yield is 3.18% higher than that of IWN (4.44% vs. 1.26%). Also, HYG yielded on average 4.55% less per year over the past decade (6.42% vs. 10.96%). The expense ratio of HYG is 0.24 percentage points higher than IWN’s (0.48% vs. 0.24%).
|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.
|AMC Entertainment Holdings Inc Class A||1.06%|
|Tenet Healthcare Corp||0.47%|
|Stag Industrial Inc||0.47%|
|EMCOR Group Inc||0.42%|
|Valley National Bancorp||0.37%|
|Chesapeake Energy Corp Ordinary Shares – New||0.37%|
|Agree Realty Corp||0.36%|
|Essent Group Ltd||0.35%|
IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.
Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a R-squared of 4.1 with a Alpha of 3.58 and a Standard Deviation of 6.96. Its Treynor Ratio is 10.01 while HYG’s Mean Return is 0.46. Furthermore, the fund has a Beta of 0.48 and a Sharpe Ratio of 0.7.
The iShares Russell 2000 Value ETF (IWN) has a Alpha of -6.32 with a Standard Deviation of 19.28 and a Beta of 1.21. Its Sharpe Ratio is 0.59 while IWN’s Mean Return is 1.01. Furthermore, the fund has a Treynor Ratio of 8.3 and a R-squared of 72.64.
HYG’s Mean Return is 0.55 points lower than that of IWN and its R-squared is 68.54 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than IWN. The Alpha and Beta of HYG are 9.90 points higher and 0.73 points lower than IWN’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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% 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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.
HYG’s CAGR is 4.55 percentage points lower than that of IWN and as a result, would have yielded $8,762 less on a $10,000 investment. Thus, HYG performed worse than IWN by 4.55% annually.
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