The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and VLUE is a iShares Large Value fund. So, what’s the difference between HYG and VLUE? And which fund is better?
The expense ratio of HYG is 0.33 percentage points higher than VLUE’s (0.48% vs. 0.15%). HYG is mostly comprised of BB bonds while VLUE has a high exposure to the technology sector. Overall, HYG has provided lower returns than VLUE over the past 7 years.
In this article, we’ll compare HYG vs. VLUE. We’ll look at fund composition and industry exposure, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss HYG’s and VLUE’s annual returns, performance, and risk metrics and examine how these affect their overall returns.
Summary
| HYG | VLUE | |
| Name | iShares iBoxx $ High Yield Corporate Bond ETF | iShares MSCI USA Value Factor ETF |
| Category | High Yield Bond | Large Value |
| Issuer | iShares | iShares |
| AUM | 20.03B | 15.95B |
| Avg. Return | 6.42% | 8.91% |
| Div. Yield | 4.44% | 1.89% |
| 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 Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.
HYG’s dividend yield is 2.55% higher than that of VLUE (4.44% vs. 1.89%). Also, HYG yielded on average 2.49% less per year over the past decade (6.42% vs. 8.91%). The expense ratio of HYG is 0.33 percentage points higher than VLUE’s (0.48% vs. 0.15%).
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.
| VLUE Holdings | Weight |
| AT&T Inc | 7.13% |
| Intel Corp | 6.14% |
| General Motors Co | 3.19% |
| Micron Technology Inc | 3.14% |
| Cisco Systems Inc | 3.05% |
| International Business Machines Corp | 2.76% |
| Target Corp | 2.38% |
| Citigroup Inc | 2.32% |
| Ford Motor Co | 2.23% |
| Pfizer Inc | 2.17% |
VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.
International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.
Risk Analysis
| HYG | VLUE | |
| 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 Standard Deviation of 6.96 and a Sharpe Ratio of 0.7. Its Beta is 0.48 while HYG’s Alpha is 3.58. Furthermore, the fund has a Treynor Ratio of 10.01 and a R-squared of 4.1.
The iShares MSCI USA Value Factor ETF (VLUE) has a Sharpe Ratio of 0 with a Standard Deviation of 0 and a Mean Return of 0. Its Alpha is 0 while VLUE’s Treynor Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Beta of 0.
HYG’s Mean Return is 0.46 points higher than that of VLUE and its R-squared is 4.10 points higher. With a Standard Deviation of 6.96, HYG is slightly more volatile than VLUE. The Alpha and Beta of HYG are 3.58 points higher and 0.48 points higher than VLUE’s Alpha and Beta.
Performance
Annual Returns
| Year | HYG | VLUE |
| 2020 | 4.12% | -0.32% |
| 2019 | 14.23% | 27.47% |
| 2018 | -1.93% | -11.18% |
| 2017 | 6.09% | 21.97% |
| 2016 | 13.92% | 15.68% |
| 2015 | -5.55% | -3.54% |
| 2014 | 2.0% | 12.29% |
| 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 2019 was the strongest year for VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| HYG | $10,000 | $13,580 | 6.42% |
| VLUE | $10,000 | $17,247 | 8.91% |
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 VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.
HYG’s CAGR is 2.49 percentage points lower than that of VLUE and as a result, would have yielded $3,667 less on a $10,000 investment. Thus, HYG performed worse than VLUE by 2.49% annually.
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