The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VCIT and HYG? And which fund is better?
The expense ratio of VCIT is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%). VCIT is mostly comprised of BBB bonds and HYG has a high exposure to BB bond. Overall, VCIT has provided lower returns than HYG over the past ten years.
In this article, we’ll compare VCIT vs. HYG. We’ll look at fund composition and industry exposure, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VCIT’s and HYG’s annual returns, holdings, and performance and examine how these affect their overall returns.
|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Corporate Bond||High Yield Bond|
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% 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%.
VCIT’s dividend yield is 2.11% lower than that of HYG (2.33% vs. 4.44%). Also, VCIT yielded on average 0.57% less per year over the past decade (5.84% vs. 6.42%). The expense ratio of VCIT is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%).
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|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 Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Mean Return of 0.44 with a Treynor Ratio of 3.43 and a Standard Deviation of 5.08. Its Sharpe Ratio is 0.91 while VCIT’s Beta is 1.35. Furthermore, the fund has a R-squared of 63.18 and a Alpha of 0.89.
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 Beta of 0.48. Its R-squared is 4.1 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Alpha of 3.58 and a Mean Return of 0.46.
VCIT’s Mean Return is 0.02 points lower than that of HYG and its R-squared is 59.08 points higher. With a Standard Deviation of 5.08, VCIT is slightly less volatile than HYG. The Alpha and Beta of VCIT are 2.69 points lower and 0.87 points higher than HYG’s Alpha and Beta.
VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% 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 VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.
With a $10,000 investment in HYG, the end total would have been $17,335. This equates to a $7,335 profit over 10 years and a compound annual growth rate (CAGR) of 6.42%.
VCIT’s CAGR is 0.57 percentage points lower than that of HYG and as a result, would have yielded $104 more on a $10,000 investment. Thus, VCIT performed worse than HYG by 0.57% annually.
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