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IAU vs. HYG: What’s The Difference?

The iShares Gold Trust (IAU) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IAU is a iShares N/A fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IAU and HYG? And which fund is better?

The expense ratio of IAU is 0.23 percentage points lower than HYG’s (0.25% vs. 0.48%). IAU also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, IAU has provided lower returns than HYG over the past 11 years.

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

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Summary

IAUHYG
NameiShares Gold TrustiShares iBoxx $ High Yield Corporate Bond ETF
CategoryN/AHigh Yield Bond
IssueriSharesiShares
AUM28.61B20.03B
Avg. Return6.03%6.42%
Div. Yield0.0%4.44%
Expense Ratio0.25%0.48%

The iShares Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

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%.

IAU’s dividend yield is 4.44% lower than that of HYG (0.0% vs. 4.44%). Also, IAU yielded on average 0.38% less per year over the past decade (6.03% vs. 6.42%). The expense ratio of IAU is 0.23 percentage points lower than HYG’s (0.25% vs. 0.48%).

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Fund Composition

Holdings

IAU - Holdings

IAU HoldingsWeight
Gold100.0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
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.

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Risk Analysis

IAUHYG
Mean Return0.230.46
R-squared16.034.1
Std. Deviation16.976.96
Alpha4.163.58
Beta0.480.48
Sharpe Ratio0.130.7
Treynor Ratio1.510.01

The iShares Gold Trust (IAU) has a R-squared of 16.03 with a Beta of 0.48 and a Treynor Ratio of 1.5. Its Sharpe Ratio is 0.13 while IAU’s Standard Deviation is 16.97. Furthermore, the fund has a Mean Return of 0.23 and a Alpha of 4.16.

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

IAU’s Mean Return is 0.23 points lower than that of HYG and its R-squared is 11.93 points higher. With a Standard Deviation of 16.97, IAU is slightly more volatile than HYG. The Alpha and Beta of IAU are 0.58 points higher and 0.00 points lower than HYG’s Alpha and Beta.

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Performance

Annual Returns

IAU vs. HYG - Annual Returns

YearIAUHYG
202023.86%4.12%
201918.54%14.23%
2018-1.39%-1.93%
201711.58%6.09%
20168.85%13.92%
2015-11.65%-5.55%
2014-0.44%2.0%
2013-27.96%5.9%
20128.37%13.83%
20118.66%5.89%
201027.93%12.07%

IAU had its best year in 2010 with an annual return of 27.93%. IAU’s worst year over the past decade yielded -27.96% and occurred in 2013. In most years the iShares Gold Trust provided moderate returns such as in 2012, 2011, and 2016 where annual returns amounted to 8.37%, 8.66%, and 8.85% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

IAU vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IAU$10,000$16,7866.03%
HYG$10,000$19,4276.42%

A $10,000 investment in IAU would have resulted in a final balance of $16,786. This is a profit of $6,786 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.03%.

With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.

IAU’s CAGR is 0.38 percentage points lower than that of HYG and as a result, would have yielded $2,641 less on a $10,000 investment. Thus, IAU performed worse than HYG by 0.38% annually.


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