The Vanguard Large-Cap Index Fund ETF Shares (VV) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VV is a Vanguard Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VV and HYG? And which fund is better?
The expense ratio of VV is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%). VV also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VV has provided higher returns than HYG over the past 11 years.
In this article, we’ll compare VV vs. HYG. We’ll look at annual returns and holdings, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss VV’s and HYG’s industry exposure, fund composition, and performance and examine how these affect their overall returns.
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Summary
| VV | HYG | |
| Name | Vanguard Large-Cap Index Fund ETF Shares | iShares iBoxx $ High Yield Corporate Bond ETF |
| Category | Large Blend | High Yield Bond |
| Issuer | Vanguard | iShares |
| AUM | 37.65B | 20.03B |
| Avg. Return | 14.75% | 6.42% |
| Div. Yield | 1.26% | 4.44% |
| Expense Ratio | 0.04% | 0.48% |
The Vanguard Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.
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%.
VV’s dividend yield is 3.18% lower than that of HYG (1.26% vs. 4.44%). Also, VV yielded on average 8.33% more per year over the past decade (14.75% vs. 6.42%). The expense ratio of VV is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%).
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Fund Composition
Holdings
| VV Holdings | Weight |
| Apple Inc | 5.7% |
| Microsoft Corp | 5.35% |
| Amazon.com Inc | 3.87% |
| Facebook Inc Class A | 2.19% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.81% |
| Tesla Inc | 1.37% |
| Berkshire Hathaway Inc Class B | 1.3% |
| NVIDIA Corp | 1.24% |
| JPMorgan Chase & Co | 1.24% |
VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.
Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.
| 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
| VV | HYG | |
| Mean Return | 1.24 | 0.46 |
| R-squared | 99.86 | 4.1 |
| Std. Deviation | 13.75 | 6.96 |
| Alpha | -0.08 | 3.58 |
| Beta | 1.01 | 0.48 |
| Sharpe Ratio | 1.04 | 0.7 |
| Treynor Ratio | 14.14 | 10.01 |
The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Sharpe Ratio of 1.04 with a Beta of 1.01 and a Mean Return of 1.24. Its Treynor Ratio is 14.14 while VV’s Alpha is -0.08. Furthermore, the fund has a R-squared of 99.86 and a Standard Deviation of 13.75.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a R-squared of 4.1 with a Beta of 0.48 and a Treynor Ratio of 10.01. Its Mean Return is 0.46 while HYG’s Alpha is 3.58. Furthermore, the fund has a Standard Deviation of 6.96 and a Sharpe Ratio of 0.7.
VV’s Mean Return is 0.78 points higher than that of HYG and its R-squared is 95.76 points higher. With a Standard Deviation of 13.75, VV is slightly more volatile than HYG. The Alpha and Beta of VV are 3.66 points lower and 0.53 points higher than HYG’s Alpha and Beta.
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Performance
Annual Returns
| Year | VV | HYG |
| 2020 | 20.99% | 4.12% |
| 2019 | 31.39% | 14.23% |
| 2018 | -4.44% | -1.93% |
| 2017 | 22.03% | 6.09% |
| 2016 | 11.65% | 13.92% |
| 2015 | 1.07% | -5.55% |
| 2014 | 13.39% | 2.0% |
| 2013 | 32.65% | 5.9% |
| 2012 | 16.09% | 13.83% |
| 2011 | 1.58% | 5.89% |
| 2010 | 15.81% | 12.07% |
VV had its best year in 2013 with an annual return of 32.65%. VV’s worst year over the past decade yielded -4.44% and occurred in 2018. In most years the Vanguard Large-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.39%, 15.81%, and 16.09% 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 |
| VV | $10,000 | $42,970 | 14.75% |
| HYG | $10,000 | $19,427 | 6.42% |
A $10,000 investment in VV would have resulted in a final balance of $42,970. This is a profit of $32,970 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.75%.
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%.
VV’s CAGR is 8.33 percentage points higher than that of HYG and as a result, would have yielded $23,543 more on a $10,000 investment. Thus, VV outperformed HYG by 8.33% annually.
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