IEFA vs. HYG: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IEFA and HYG? And which fund is better?

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

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

Summary

IEFA HYG
Name iShares Core MSCI EAFE ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Foreign Large Blend High Yield Bond
Issuer iShares iShares
AUM 95.78B 20.03B
Avg. Return 5.79% 6.42%
Div. Yield 2.28% 4.44%
Expense Ratio 0.07% 0.48%

The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 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%.

IEFA’s dividend yield is 2.16% lower than that of HYG (2.28% vs. 4.44%). Also, IEFA yielded on average 0.63% less per year over the past decade (5.79% vs. 6.42%). The expense ratio of IEFA is 0.41 percentage points lower than HYG’s (0.07% vs. 0.48%).

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Fund Composition

Holdings

IEFA - Holdings

IEFA Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.

Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.

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.

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Performance

Annual Returns

IEFA vs. HYG - Annual Returns

Year IEFA HYG
2020 8.55% 4.12%
2019 22.67% 14.23%
2018 -14.2% -1.93%
2017 26.42% 6.09%
2016 1.36% 13.92%
2015 0.53% -5.55%
2014 -4.82% 2.0%
2013 23.73% 5.9%
2012 0.0% 13.83%
2011 0.0% 5.89%
2010 0.0% 12.07%

IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% 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

IEFA vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
HYG $10,000 $13,580 6.42%

A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in HYG, the end total would have been $13,580. This equates to a $3,580 profit over 7 years and a compound annual growth rate (CAGR) of 6.42%.

IEFA’s CAGR is 0.63 percentage points lower than that of HYG and as a result, would have yielded $428 more on a $10,000 investment. Thus, IEFA performed worse than HYG by 0.63% annually.


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