The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between HYG and VBK? And which fund is better?
The expense ratio of HYG is 0.41 percentage points higher than VBK’s (0.48% vs. 0.07%). HYG is mostly comprised of BB bonds while VBK has a high exposure to the technology sector. Overall, HYG has provided lower returns than VBK over the past 11 years.
In this article, we’ll compare HYG vs. VBK. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss HYG’s and VBK’s fund composition, annual returns, and performance and examine how these affect their overall returns.
Summary
| HYG | VBK | |
| Name | iShares iBoxx $ High Yield Corporate Bond ETF | Vanguard Small-Cap Growth Index Fund ETF Shares |
| Category | High Yield Bond | Small Growth |
| Issuer | iShares | Vanguard |
| AUM | 20.03B | 37.89B |
| Avg. Return | 6.42% | 16.53% |
| Div. Yield | 4.44% | 0.45% |
| Expense Ratio | 0.48% | 0.07% |
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.
HYG’s dividend yield is 3.99% higher than that of VBK (4.44% vs. 0.45%). Also, HYG yielded on average 10.11% less per year over the past decade (6.42% vs. 16.53%). The expense ratio of HYG is 0.41 percentage points higher than VBK’s (0.48% vs. 0.07%).
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.
| VBK Holdings | Weight |
| Charles River Laboratories International Inc | 0.78% |
| Pool Corp | 0.73% |
| Bio-Techne Corp | 0.73% |
| Avantor Inc | 0.73% |
| PerkinElmer Inc | 0.72% |
| Entegris Inc | 0.7% |
| PTC Inc | 0.62% |
| Fair Isaac Corp | 0.57% |
| Bill.com Holdings Inc Ordinary Shares | 0.56% |
| Avalara Inc | 0.55% |
VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.
Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.
Risk Analysis
| HYG | VBK | |
| Mean Return | 0.46 | 1.22 |
| R-squared | 4.1 | 80.56 |
| Std. Deviation | 6.96 | 17.95 |
| Alpha | 3.58 | -2.81 |
| Beta | 0.48 | 1.18 |
| Sharpe Ratio | 0.7 | 0.78 |
| Treynor Ratio | 10.01 | 11.18 |
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a R-squared of 4.1 and a Sharpe Ratio of 0.7. Its Beta is 0.48 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Mean Return of 0.46 and a Standard Deviation of 6.96.
The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Sharpe Ratio of 0.78 with a R-squared of 80.56 and a Beta of 1.18. Its Alpha is -2.81 while VBK’s Mean Return is 1.22. Furthermore, the fund has a Treynor Ratio of 11.18 and a Standard Deviation of 17.95.
HYG’s Mean Return is 0.76 points lower than that of VBK and its R-squared is 76.46 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than VBK. The Alpha and Beta of HYG are 6.39 points higher and 0.70 points lower than VBK’s Alpha and Beta.
Performance
Annual Returns
| Year | HYG | VBK |
| 2020 | 4.12% | 35.29% |
| 2019 | 14.23% | 32.75% |
| 2018 | -1.93% | -5.68% |
| 2017 | 6.09% | 21.9% |
| 2016 | 13.92% | 10.74% |
| 2015 | -5.55% | -2.51% |
| 2014 | 2.0% | 4.02% |
| 2013 | 5.9% | 38.18% |
| 2012 | 13.83% | 17.67% |
| 2011 | 5.89% | -1.43% |
| 2010 | 12.07% | 30.87% |
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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| HYG | $10,000 | $19,427 | 6.42% |
| VBK | $10,000 | $48,639 | 16.53% |
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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.
HYG’s CAGR is 10.11 percentage points lower than that of VBK and as a result, would have yielded $29,212 less on a $10,000 investment. Thus, HYG performed worse than VBK by 10.11% annually.
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