IGSB vs. HYG: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IGSB and HYG? And which fund is better?

The expense ratio of IGSB is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%). IGSB is mostly comprised of BBB bonds and HYG has a high exposure to BB bond. Overall, IGSB has provided lower returns than HYG over the past 11 years.

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

Summary

IGSB HYG
Name iShares 1-5 Year Investment Grade Corporate Bond ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Short-Term Bond High Yield Bond
Issuer iShares iShares
AUM 26.63B 20.03B
Avg. Return 2.51% 6.42%
Div. Yield 2.02% 4.44%
Expense Ratio 0.06% 0.48%

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

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%.

IGSB’s dividend yield is 2.42% lower than that of HYG (2.02% vs. 4.44%). Also, IGSB yielded on average 3.91% less per year over the past decade (2.51% vs. 6.42%). The expense ratio of IGSB is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%).

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Fund Composition

Holdings

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

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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Risk Analysis

IGSB HYG
Mean Return 0.19 0.46
R-squared 26.13 4.1
Std. Deviation 2 6.96
Alpha 0.69 3.58
Beta 0.34 0.48
Sharpe Ratio 0.82 0.7
Treynor Ratio 4.82 10.01

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Alpha of 0.69 with a Sharpe Ratio of 0.82 and a Beta of 0.34. Its Mean Return is 0.19 while IGSB’s R-squared is 26.13. Furthermore, the fund has a Standard Deviation of 2 and a Treynor Ratio of 4.82.

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

IGSB’s Mean Return is 0.27 points lower than that of HYG and its R-squared is 22.03 points higher. With a Standard Deviation of 2, IGSB is slightly less volatile than HYG. The Alpha and Beta of IGSB are 2.89 points lower and 0.14 points lower than HYG’s Alpha and Beta.

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Performance

Annual Returns

IGSB vs. HYG - Annual Returns

Year IGSB HYG
2020 5.26% 4.12%
2019 7.01% 14.23%
2018 1.34% -1.93%
2017 1.41% 6.09%
2016 1.77% 13.92%
2015 0.7% -5.55%
2014 0.74% 2.0%
2013 1.03% 5.9%
2012 3.28% 13.83%
2011 1.34% 5.89%
2010 3.69% 12.07%

IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% 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

IGSB vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IGSB $10,000 $13,103 2.51%
HYG $10,000 $19,427 6.42%

A $10,000 investment in IGSB would have resulted in a final balance of $13,103. This is a profit of $3,103 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.51%.

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%.

IGSB’s CAGR is 3.91 percentage points lower than that of HYG and as a result, would have yielded $6,324 less on a $10,000 investment. Thus, IGSB performed worse than HYG by 3.91% annually.


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