The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and VHT is a Vanguard Health fund. So, what’s the difference between HYG and VHT? And which fund is better?
The expense ratio of HYG is 0.38 percentage points higher than VHT’s (0.48% vs. 0.1%). HYG is mostly comprised of BB bonds while VHT has a high exposure to the healthcare sector. Overall, HYG has provided lower returns than VHT over the past 11 years.
In this article, we’ll compare HYG vs. VHT. We’ll look at portfolio growth and holdings, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss HYG’s and VHT’s risk metrics, performance, and annual returns and examine how these affect their overall returns.
Summary
| HYG | VHT | |
| Name | iShares iBoxx $ High Yield Corporate Bond ETF | Vanguard Health Care Index Fund ETF Shares |
| Category | High Yield Bond | Health |
| Issuer | iShares | Vanguard |
| AUM | 20.03B | 17.94B |
| Avg. Return | 6.42% | 16.04% |
| Div. Yield | 4.44% | 1.15% |
| Expense Ratio | 0.48% | 0.1% |
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
HYG’s dividend yield is 3.29% higher than that of VHT (4.44% vs. 1.15%). Also, HYG yielded on average 9.62% less per year over the past decade (6.42% vs. 16.04%). The expense ratio of HYG is 0.38 percentage points higher than VHT’s (0.48% vs. 0.1%).
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.
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
Risk Analysis
| HYG | VHT | |
| Mean Return | 0.46 | 1.33 |
| R-squared | 4.1 | 59.86 |
| Std. Deviation | 6.96 | 13.58 |
| Alpha | 3.58 | 7.99 |
| Beta | 0.48 | 0.75 |
| Sharpe Ratio | 0.7 | 1.13 |
| Treynor Ratio | 10.01 | 20.74 |
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Beta of 0.48 with a R-squared of 4.1 and a Sharpe Ratio of 0.7. Its Standard Deviation is 6.96 while HYG’s Alpha is 3.58. Furthermore, the fund has a Mean Return of 0.46 and a Treynor Ratio of 10.01.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Sharpe Ratio of 1.13 with a Mean Return of 1.33 and a Standard Deviation of 13.58. Its Beta is 0.75 while VHT’s Alpha is 7.99. Furthermore, the fund has a R-squared of 59.86 and a Treynor Ratio of 20.74.
HYG’s Mean Return is 0.87 points lower than that of VHT and its R-squared is 55.76 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than VHT. The Alpha and Beta of HYG are 4.41 points lower and 0.27 points lower than VHT’s Alpha and Beta.
Performance
Annual Returns
| Year | HYG | VHT |
| 2020 | 4.12% | 18.21% |
| 2019 | 14.23% | 21.97% |
| 2018 | -1.93% | 5.55% |
| 2017 | 6.09% | 23.34% |
| 2016 | 13.92% | -3.33% |
| 2015 | -5.55% | 7.22% |
| 2014 | 2.0% | 25.38% |
| 2013 | 5.9% | 42.67% |
| 2012 | 13.83% | 19.1% |
| 2011 | 5.89% | 10.57% |
| 2010 | 12.07% | 5.75% |
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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| HYG | $10,000 | $19,427 | 6.42% |
| VHT | $10,000 | $48,464 | 16.04% |
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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.
HYG’s CAGR is 9.62 percentage points lower than that of VHT and as a result, would have yielded $29,037 less on a $10,000 investment. Thus, HYG performed worse than VHT by 9.62% annually.
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