HYG vs. VOE: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and VOE is a Vanguard Mid-Cap Value fund. So, what’s the difference between HYG and VOE? And which fund is better?

The expense ratio of HYG is 0.41 percentage points higher than VOE’s (0.48% vs. 0.07%). HYG is mostly comprised of BB bonds while VOE has a high exposure to the financial services sector. Overall, HYG has provided lower returns than VOE over the past 11 years.

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

Summary

HYG VOE
Name iShares iBoxx $ High Yield Corporate Bond ETF Vanguard Mid-Cap Value Index Fund ETF Shares
Category High Yield Bond Mid-Cap Value
Issuer iShares Vanguard
AUM 20.03B 26.78B
Avg. Return 6.42% 12.52%
Div. Yield 4.44% 1.87%
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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.

HYG’s dividend yield is 2.57% higher than that of VOE (4.44% vs. 1.87%). Also, HYG yielded on average 6.11% less per year over the past decade (6.42% vs. 12.52%). The expense ratio of HYG is 0.41 percentage points higher than VOE’s (0.48% vs. 0.07%).

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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.

VOE - Holdings

VOE Holdings Weight
Carrier Global Corp Ordinary Shares 1.28%
International Flavors & Fragrances Inc 1.13%
Motorola Solutions Inc 1.12%
Discover Financial Services 1.09%
Welltower Inc 1.05%
Corteva Inc 0.99%
Valero Energy Corp 0.97%
Corning Inc 0.95%
Willis Towers Watson PLC 0.9%
D.R. Horton Inc 0.89%

VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.

Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.

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Risk Analysis

HYG VOE
Mean Return 0.46 1.05
R-squared 4.1 88.76
Std. Deviation 6.96 15.98
Alpha 3.58 -3.77
Beta 0.48 1.11
Sharpe Ratio 0.7 0.75
Treynor Ratio 10.01 10.19

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

The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Treynor Ratio of 10.19 with a Standard Deviation of 15.98 and a Alpha of -3.77. Its Beta is 1.11 while VOE’s Mean Return is 1.05. Furthermore, the fund has a Sharpe Ratio of 0.75 and a R-squared of 88.76.

HYG’s Mean Return is 0.59 points lower than that of VOE and its R-squared is 84.66 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than VOE. The Alpha and Beta of HYG are 7.35 points higher and 0.63 points lower than VOE’s Alpha and Beta.

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Performance

Annual Returns

HYG vs. VOE - Annual Returns

Year HYG VOE
2020 4.12% 2.5%
2019 14.23% 27.98%
2018 -1.93% -12.41%
2017 6.09% 17.05%
2016 13.92% 15.26%
2015 -5.55% -1.8%
2014 2.0% 13.98%
2013 5.9% 37.65%
2012 13.83% 16.04%
2011 5.89% -0.32%
2010 12.07% 21.83%

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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.

Portfolio Growth

HYG vs. VOE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
HYG $10,000 $19,427 6.42%
VOE $10,000 $33,655 12.52%

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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.

HYG’s CAGR is 6.11 percentage points lower than that of VOE and as a result, would have yielded $14,228 less on a $10,000 investment. Thus, HYG performed worse than VOE by 6.11% annually.


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