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VCSH vs. HYG: What’s The Difference?

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

The expense ratio of VCSH is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%). VCSH is mostly comprised of BBB bonds and HYG has a high exposure to BB bond. Overall, VCSH has provided lower returns than HYG over the past ten years.

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

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Summary

VCSHHYG
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares iBoxx $ High Yield Corporate Bond ETF
CategoryShort-Term BondHigh Yield Bond
IssuerVanguardiShares
AUM47.88B20.03B
Avg. Return3.12%6.42%
Div. Yield1.89%4.44%
Expense Ratio0.05%0.48%

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% 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%.

VCSH’s dividend yield is 2.55% lower than that of HYG (1.89% vs. 4.44%). Also, VCSH yielded on average 3.30% less per year over the past decade (3.12% vs. 6.42%). The expense ratio of VCSH is 0.43 percentage points lower than HYG’s (0.05% vs. 0.48%).

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Fund Composition

Holdings

VCSH - Holdings

VCSH Bond SectorsWeight
BBB47.49%
A43.06%
AA8.45%
AAA0.95%
Below B0.03%
Others0.02%
B0.0%
BB0.0%
US Government0.0%

VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.

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

VCSHHYG
Mean Return0.240.46
R-squared37.534.1
Std. Deviation2.346.96
Alpha0.933.58
Beta0.480.48
Sharpe Ratio0.970.7
Treynor Ratio4.7510.01

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Sharpe Ratio of 0.97 with a Mean Return of 0.24 and a Beta of 0.48. Its Treynor Ratio is 4.75 while VCSH’s R-squared is 37.53. Furthermore, the fund has a Alpha of 0.93 and a Standard Deviation of 2.34.

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

VCSH’s Mean Return is 0.22 points lower than that of HYG and its R-squared is 33.43 points higher. With a Standard Deviation of 2.34, VCSH is slightly less volatile than HYG. The Alpha and Beta of VCSH are 2.65 points lower and 0.00 points lower than HYG’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. HYG - Annual Returns

YearVCSHHYG
20205.08%4.12%
20196.85%14.23%
20180.91%-1.93%
20172.45%6.09%
20162.63%13.92%
20151.25%-5.55%
20141.96%2.0%
20131.37%5.9%
20125.74%13.83%
20112.94%5.89%
20105.51%12.07%

VCSH had its best year in 2019 with an annual return of 6.85%. VCSH’s worst year over the past decade yielded 0.91% and occurred in 2018. In most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 2.45%, 2.63%, and 2.94% 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.

Portfolio Growth

VCSH vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
HYG$10,000$17,3356.42%

A $10,000 investment in VCSH would have resulted in a final balance of $13,569. This is a profit of $3,569 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

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%.

VCSH’s CAGR is 3.30 percentage points lower than that of HYG and as a result, would have yielded $3,766 less on a $10,000 investment. Thus, VCSH performed worse than HYG by 3.30% annually.


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