HYG vs. MTUM: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between HYG and MTUM? And which fund is better?

The expense ratio of HYG is 0.33 percentage points higher than MTUM’s (0.48% vs. 0.15%). HYG is mostly comprised of BB bonds while MTUM has a high exposure to the financial services sector. Overall, HYG has provided lower returns than MTUM over the past 7 years.

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

Summary

HYG MTUM
Name iShares iBoxx $ High Yield Corporate Bond ETF iShares MSCI USA Momentum Factor ETF
Category High Yield Bond Large Growth
Issuer iShares iShares
AUM 20.03B 14.53B
Avg. Return 6.42% 17.37%
Div. Yield 4.44% 0.44%
Expense Ratio 0.48% 0.15%

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 USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

HYG’s dividend yield is 4.00% higher than that of MTUM (4.44% vs. 0.44%). Also, HYG yielded on average 10.95% less per year over the past decade (6.42% vs. 17.37%). The expense ratio of HYG is 0.33 percentage points higher than MTUM’s (0.48% vs. 0.15%).

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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.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

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Risk Analysis

HYG MTUM
Mean Return 0.46 0
R-squared 4.1 0
Std. Deviation 6.96 0
Alpha 3.58 0
Beta 0.48 0
Sharpe Ratio 0.7 0
Treynor Ratio 10.01 0

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Mean Return of 0.46 with a Alpha of 3.58 and a Standard Deviation of 6.96. Its Beta is 0.48 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Sharpe Ratio of 0.7 and a R-squared of 4.1.

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Mean Return of 0 with a R-squared of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while MTUM’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Beta of 0.

HYG’s Mean Return is 0.46 points higher than that of MTUM and its R-squared is 4.10 points higher. With a Standard Deviation of 6.96, HYG is slightly more volatile than MTUM. The Alpha and Beta of HYG are 3.58 points higher and 0.48 points higher than MTUM’s Alpha and Beta.

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Performance

Annual Returns

HYG vs. MTUM - Annual Returns

Year HYG MTUM
2020 4.12% 29.69%
2019 14.23% 27.57%
2018 -1.93% -1.77%
2017 6.09% 37.6%
2016 13.92% 4.89%
2015 -5.55% 9.12%
2014 2.0% 14.48%
2013 5.9% 0.0%
2012 13.83% 0.0%
2011 5.89% 0.0%
2010 12.07% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

HYG vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
HYG $10,000 $13,580 6.42%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in HYG would have resulted in a final balance of $13,580. This is a profit of $3,580 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.42%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

HYG’s CAGR is 10.95 percentage points lower than that of MTUM and as a result, would have yielded $15,721 less on a $10,000 investment. Thus, HYG performed worse than MTUM by 10.95% annually.


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