The iShares Russell 1000 Value ETF (IWD) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between IWD and HYG? And which fund is better?
The expense ratio of IWD is 0.29 percentage points lower than HYG’s (0.19% vs. 0.48%). IWD also has a high exposure to the financial services sector while HYG is mostly comprised of BB bonds. Overall, IWD has provided higher returns than HYG over the past ten years.
In this article, we’ll compare IWD vs. HYG. We’ll look at risk metrics and annual returns, as well as at their industry exposure and performance. Moreover, I’ll also discuss IWD’s and HYG’s portfolio growth, holdings, and fund composition and examine how these affect their overall returns.
|Name||iShares Russell 1000 Value ETF||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Value||High Yield Bond|
The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.
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%.
IWD’s dividend yield is 2.87% lower than that of HYG (1.57% vs. 4.44%). Also, IWD yielded on average 4.98% more per year over the past decade (11.40% vs. 6.42%). The expense ratio of IWD is 0.29 percentage points lower than HYG’s (0.19% vs. 0.48%).
|Berkshire Hathaway Inc Class B||2.58%|
|JPMorgan Chase & Co||2.25%|
|Johnson & Johnson||2.24%|
|UnitedHealth Group Inc||1.78%|
|Procter & Gamble Co||1.71%|
|The Walt Disney Co||1.5%|
|Bank of America Corp||1.43%|
|Comcast Corp Class A||1.33%|
|Exxon Mobil Corp||1.2%|
IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.
The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.
|HYG Bond Sectors||Weight|
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.
The iShares Russell 1000 Value ETF (IWD) has a Standard Deviation of 14.35 with a R-squared of 92.38 and a Alpha of -3.23. Its Sharpe Ratio is 0.81 while IWD’s Treynor Ratio is 11.06. Furthermore, the fund has a Mean Return of 1.03 and a Beta of 1.02.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Beta of 0.48 with a Alpha of 3.58 and a Standard Deviation of 6.96. Its Sharpe Ratio is 0.7 while HYG’s R-squared is 4.1. Furthermore, the fund has a Treynor Ratio of 10.01 and a Mean Return of 0.46.
IWD’s Mean Return is 0.57 points higher than that of HYG and its R-squared is 88.28 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than HYG. The Alpha and Beta of IWD are 6.81 points lower and 0.54 points higher than HYG’s Alpha and Beta.
IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.
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%.
IWD’s CAGR is 4.98 percentage points higher than that of HYG and as a result, would have yielded $11,319 more on a $10,000 investment. Thus, IWD outperformed HYG by 4.98% annually.
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