The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IEMG and HYG? And which fund is better?
The expense ratio of IEMG is 0.37 percentage points lower than HYG’s (0.11% vs. 0.48%). IEMG also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, IEMG has provided higher returns than HYG over the past ten years.
In this article, we’ll compare IEMG vs. HYG. We’ll look at annual returns and risk metrics, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss IEMG’s and HYG’s holdings, performance, and fund composition and examine how these affect their overall returns.
Summary
| IEMG | HYG | |
| Name | iShares Core MSCI Emerging Markets ETF | iShares iBoxx $ High Yield Corporate Bond ETF |
| Category | Diversified Emerging Mkts | High Yield Bond |
| Issuer | iShares | iShares |
| AUM | 83.68B | 20.03B |
| Avg. Return | 7.41% | 6.42% |
| Div. Yield | 1.78% | 4.44% |
| Expense Ratio | 0.11% | 0.48% |
The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.
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%.
IEMG’s dividend yield is 2.66% lower than that of HYG (1.78% vs. 4.44%). Also, IEMG yielded on average 0.99% more per year over the past decade (7.41% vs. 6.42%). The expense ratio of IEMG is 0.37 percentage points lower than HYG’s (0.11% vs. 0.48%).
Fund Composition
Holdings
| IEMG Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 5.37% |
| Tencent Holdings Ltd | 4.42% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.38% |
| Samsung Electronics Co Ltd | 3.49% |
| Meituan | 1.52% |
| Naspers Ltd Class N | 0.93% |
| Vale SA | 0.91% |
| Reliance Industries Ltd Shs Dematerialised | 0.83% |
| China Construction Bank Corp Class H | 0.77% |
| Infosys Ltd | 0.74% |
IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.
Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.
| 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.
Risk Analysis
| IEMG | HYG | |
| Mean Return | 0 | 0.46 |
| R-squared | 0 | 4.1 |
| Std. Deviation | 0 | 6.96 |
| Alpha | 0 | 3.58 |
| Beta | 0 | 0.48 |
| Sharpe Ratio | 0 | 0.7 |
| Treynor Ratio | 0 | 10.01 |
The iShares Core MSCI Emerging Markets ETF (IEMG) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Alpha is 0 while IEMG’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Treynor Ratio of 0.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a Sharpe Ratio of 0.7 and a Alpha of 3.58. Its Treynor Ratio is 10.01 while HYG’s R-squared is 4.1. Furthermore, the fund has a Beta of 0.48 and a Mean Return of 0.46.
IEMG’s Mean Return is 0.46 points lower than that of HYG and its R-squared is 4.10 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than HYG. The Alpha and Beta of IEMG are 3.58 points lower and 0.48 points lower than HYG’s Alpha and Beta.
Performance
Annual Returns
| Year | IEMG | HYG |
| 2020 | 18.18% | 4.12% |
| 2019 | 17.5% | 14.23% |
| 2018 | -14.69% | -1.93% |
| 2017 | 36.78% | 6.09% |
| 2016 | 9.98% | 13.92% |
| 2015 | -13.86% | -5.55% |
| 2014 | -2.04% | 2.0% |
| 2013 | -2.16% | 5.9% |
| 2012 | 0.0% | 13.83% |
| 2011 | 0.0% | 5.89% |
| 2010 | 0.0% | 12.07% |
IEMG had its best year in 2017 with an annual return of 36.78%. IEMG’s worst year over the past decade yielded -14.69% and occurred in 2018. In most years the iShares Core MSCI Emerging Markets ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% 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
| Fund | Initial Balance | Final Balance | CAGR |
| IEMG | $10,000 | $15,037 | 7.41% |
| HYG | $10,000 | $13,580 | 6.42% |
A $10,000 investment in IEMG would have resulted in a final balance of $15,037. This is a profit of $5,037 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.41%.
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%.
IEMG’s CAGR is 0.99 percentage points higher than that of HYG and as a result, would have yielded $1,457 more on a $10,000 investment. Thus, IEMG outperformed HYG by 0.99% annually.
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