The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between AGG and PFF? And which fund is better?
The expense ratio of AGG is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%). AGG is mostly comprised of AAA bonds while PFF has a high exposure to the utilities sector. Overall, AGG has provided lower returns than PFF over the past ten years.
In this article, we’ll compare AGG vs. PFF. We’ll look at annual returns and portfolio growth, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss AGG’s and PFF’s holdings, performance, and industry exposure and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares Preferred and Income Securities ETF|
|Category||Intermediate-Term Bond||Preferred Stock|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The iShares Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.
AGG’s dividend yield is 2.52% lower than that of PFF (1.95% vs. 4.47%). Also, AGG yielded on average 2.86% less per year over the past decade (4.04% vs. 6.90%). The expense ratio of AGG is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A||2.54%|
|BlackRock Cash Funds Treasury SL Agency||2.3%|
|Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-||1.79%|
|Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-||1.49%|
|ArcelorMittal S.A. 5.5%||1.36%|
|Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A||1.35%|
|Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B||1.14%|
|NextEra Energy Inc Unit||1.12%|
|Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4||1.08%|
|Avantor Inc Ser A||0.99%|
PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Alpha of -0.08 with a Standard Deviation of 3.03 and a Sharpe Ratio of 0.9. Its Mean Return is 0.28 while AGG’s Beta is 1.01. Furthermore, the fund has a Treynor Ratio of 2.7 and a R-squared of 99.96.
The iShares Preferred and Income Securities ETF (PFF) has a R-squared of 9.39 with a Mean Return of 0.52 and a Sharpe Ratio of 0.72. Its Treynor Ratio is 6.79 while PFF’s Alpha is 3.45. Furthermore, the fund has a Beta of 0.81 and a Standard Deviation of 7.87.
AGG’s Mean Return is 0.24 points lower than that of PFF and its R-squared is 90.57 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than PFF. The Alpha and Beta of AGG are 3.53 points lower and 0.20 points higher than PFF’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in PFF, the end total would have been $20,272. This equates to a $10,272 profit over 11 years and a compound annual growth rate (CAGR) of 6.90%.
AGG’s CAGR is 2.86 percentage points lower than that of PFF and as a result, would have yielded $4,904 less on a $10,000 investment. Thus, AGG performed worse than PFF by 2.86% annually.
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