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VBR vs. HYG: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VBR and HYG? And which fund is better?

The expense ratio of VBR is 0.41 percentage points lower than HYG’s (0.07% vs. 0.48%). VBR also has a high exposure to the financial services sector while HYG is mostly comprised of BB bonds. Overall, VBR has provided higher returns than HYG over the past 11 years.

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

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Summary

VBRHYG
NameVanguard Small-Cap Value Index Fund ETF SharesiShares iBoxx $ High Yield Corporate Bond ETF
CategorySmall ValueHigh Yield Bond
IssuerVanguardiShares
AUM48.08B20.03B
Avg. Return12.28%6.42%
Div. Yield1.6%4.44%
Expense Ratio0.07%0.48%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

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%.

VBR’s dividend yield is 2.84% lower than that of HYG (1.6% vs. 4.44%). Also, VBR yielded on average 5.87% more per year over the past decade (12.28% vs. 6.42%). The expense ratio of VBR is 0.41 percentage points lower than HYG’s (0.07% vs. 0.48%).

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Fund Composition

Holdings

VBR - Holdings

VBR HoldingsWeight
Diamondback Energy Inc0.55%
VICI Properties Inc Ordinary Shares0.54%
IDEX Corp0.54%
Nuance Communications Inc0.5%
Molina Healthcare Inc0.48%
Signature Bank0.46%
Novavax Inc0.44%
Howmet Aerospace Inc0.44%
Apollo Global Management Inc Class A0.42%
Brown & Brown Inc0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
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

VBRHYG
Mean Return1.080.46
R-squared82.24.1
Std. Deviation18.376.96
Alpha-5.093.58
Beta1.230.48
Sharpe Ratio0.670.7
Treynor Ratio9.1510.01

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Treynor Ratio of 9.15 with a Mean Return of 1.08 and a Standard Deviation of 18.37. Its Alpha is -5.09 while VBR’s Beta is 1.23. Furthermore, the fund has a Sharpe Ratio of 0.67 and a R-squared of 82.2.

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

VBR’s Mean Return is 0.62 points higher than that of HYG and its R-squared is 78.10 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than HYG. The Alpha and Beta of VBR are 8.67 points lower and 0.75 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

VBR vs. HYG - Annual Returns

YearVBRHYG
20205.82%4.12%
201922.76%14.23%
2018-12.22%-1.93%
201711.79%6.09%
201624.8%13.92%
2015-4.67%-5.55%
201410.55%2.0%
201336.57%5.9%
201218.78%13.83%
2011-4.05%5.89%
201024.97%12.07%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% 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

VBR vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBR$10,000$32,61112.28%
HYG$10,000$19,4276.42%

A $10,000 investment in VBR would have resulted in a final balance of $32,611. This is a profit of $22,611 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

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%.

VBR’s CAGR is 5.87 percentage points higher than that of HYG and as a result, would have yielded $13,184 more on a $10,000 investment. Thus, VBR outperformed HYG by 5.87% annually.


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