The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VB and HYG? And which fund is better?
The expense ratio of VB is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%). VB also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VB has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VB vs. HYG. We’ll look at holdings and industry exposure, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VB’s and HYG’s annual returns, performance, and fund composition and examine how these affect their overall returns.
Summary
| VB | HYG | |
| NameVanguard Small-Cap Index Fund ETF SharesiShares iBoxx $ High Yield Corporate Bond ETF | ||
| Category | Small Blend | High Yield Bond |
| Issuer | Vanguard | iShares |
| AUM | 137.72B | 20.03B |
| Avg. Return | 14.25% | 6.42% |
| Div. Yield | 1.14% | 4.44% |
| Expense Ratio | 0.05% | 0.48% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
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%.
VB’s dividend yield is 3.30% lower than that of HYG (1.14% vs. 4.44%). Also, VB yielded on average 7.84% more per year over the past decade (14.25% vs. 6.42%). The expense ratio of VB is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%).
Fund Composition
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| 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
| VB | HYG | |
| Mean Return | 1.15 | 0.46 |
| R-squared | 85.03 | 4.1 |
| Std. Deviation | 17.82 | 6.96 |
| Alpha | -4.02 | 3.58 |
| Beta | 1.21 | 0.48 |
| Sharpe Ratio | 0.74 | 0.7 |
| Treynor Ratio | 10.15 | 10.01 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Beta of 1.21 with a Treynor Ratio of 10.15 and a Mean Return of 1.15. Its Standard Deviation is 17.82 while VB’s Sharpe Ratio is 0.74. Furthermore, the fund has a R-squared of 85.03 and a Alpha of -4.02.
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 R-squared of 4.1. Its Alpha is 3.58 while HYG’s Mean Return is 0.46. Furthermore, the fund has a Treynor Ratio of 10.01 and a Beta of 0.48.
VB’s Mean Return is 0.69 points higher than that of HYG and its R-squared is 80.93 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than HYG. The Alpha and Beta of VB are 7.60 points lower and 0.73 points higher than HYG’s Alpha and Beta.
Performance
Annual Returns
| Year | VB | HYG |
| 2020 | 19.08% | 4.12% |
| 2019 | 27.37% | 14.23% |
| 2018 | -9.3% | -1.93% |
| 2017 | 16.24% | 6.09% |
| 2016 | 18.31% | 13.92% |
| 2015 | -3.65% | -5.55% |
| 2014 | 7.51% | 2.0% |
| 2013 | 37.8% | 5.9% |
| 2012 | 18.22% | 13.83% |
| 2011 | -2.68% | 5.89% |
| 2010 | 27.89% | 12.07% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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 |
| VB | $10,000 | $39,734 | 14.25% |
| HYG | $10,000 | $19,427 | 6.42% |
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
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%.
VB’s CAGR is 7.84 percentage points higher than that of HYG and as a result, would have yielded $20,307 more on a $10,000 investment. Thus, VB outperformed HYG by 7.84% annually.
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