IWB vs. HYG: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IWB and HYG? And which fund is better?

The expense ratio of IWB is 0.33 percentage points lower than HYG’s (0.15% vs. 0.48%). IWB also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, IWB has provided higher returns than HYG over the past ten years.

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

Summary

IWB HYG
Name iShares Russell 1000 ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Large Blend High Yield Bond
Issuer iShares iShares
AUM 30.54B 20.03B
Avg. Return 14.64% 6.42%
Div. Yield 1.14% 4.44%
Expense Ratio 0.15% 0.48%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 3.30% lower than that of HYG (1.14% vs. 4.44%). Also, IWB yielded on average 8.22% more per year over the past decade (14.64% vs. 6.42%). The expense ratio of IWB is 0.33 percentage points lower than HYG’s (0.15% vs. 0.48%).

Fund Composition

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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.

Risk Analysis

IWB HYG
Mean Return 1.27 0.46
R-squared 99.73 4.1
Std. Deviation 13.87 6.96
Alpha -0.38 3.58
Beta 1.02 0.48
Sharpe Ratio 1.05 0.7
Treynor Ratio 14.31 10.01

The iShares Russell 1000 ETF (IWB) has a Alpha of -0.38 with a Treynor Ratio of 14.31 and a Sharpe Ratio of 1.05. Its R-squared is 99.73 while IWB’s Standard Deviation is 13.87. Furthermore, the fund has a Mean Return of 1.27 and a Beta of 1.02.

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

IWB’s Mean Return is 0.81 points higher than that of HYG and its R-squared is 95.63 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than HYG. The Alpha and Beta of IWB are 3.96 points lower and 0.54 points higher than HYG’s Alpha and Beta.

Performance

Annual Returns

IWB vs. HYG - Annual Returns

Year IWB HYG
2020 20.8% 4.12%
2019 31.26% 14.23%
2018 -4.91% -1.93%
2017 21.53% 6.09%
2016 11.91% 13.92%
2015 0.82% -5.55%
2014 13.08% 2.0%
2013 32.93% 5.9%
2012 16.27% 13.83%
2011 1.36% 5.89%
2010 15.94% 12.07%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $42,462 14.64%
HYG $10,000 $19,427 6.42%

A $10,000 investment in IWB would have resulted in a final balance of $42,462. This is a profit of $32,462 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 8.22 percentage points higher than that of HYG and as a result, would have yielded $23,035 more on a $10,000 investment. Thus, IWB outperformed HYG by 8.22% annually.


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