ARKK vs. PFF: What’s The Difference?

The ARK Innovation ETF (ARKK) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between ARKK and PFF? And which fund is better?

The expense ratio of ARKK is 0.29 percentage points higher than PFF’s (0.75% vs. 0.46%). ARKK also has a higher exposure to the technology sector and a lower standard deviation. Overall, ARKK has provided higher returns than PFF over the past 5 years.

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

Summary

ARKK PFF
Name ARK Innovation ETF iShares Preferred and Income Securities ETF
Category Mid-Cap Growth Preferred Stock
Issuer ARK ETF Trust iShares
AUM 25.52B 19.8B
Avg. Return 55.45% 6.90%
Div. Yield 0.0% 4.47%
Expense Ratio 0.75% 0.46%

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

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%.

ARKK’s dividend yield is 4.47% lower than that of PFF (0.0% vs. 4.47%). Also, ARKK yielded on average 48.55% more per year over the past decade (55.45% vs. 6.90%). The expense ratio of ARKK is 0.29 percentage points higher than PFF’s (0.75% vs. 0.46%).

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Fund Composition

Industry Exposure

ARKK vs. PFF - Industry Exposure

ARKK PFF
Technology 30.5% 0.0%
Industrials 2.11% 10.27%
Energy 0.0% 0.0%
Communication Services 25.01% 0.0%
Utilities 0.0% 81.81%
Healthcare 29.47% 3.54%
Consumer Defensive 0.93% 0.0%
Real Estate 0.51% 0.65%
Financial Services 0.04% 0.0%
Consumer Cyclical 11.42% 0.0%
Basic Materials 0.0% 3.74%

The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

ARKK is 30.50% more exposed to the Technology sector than PFF (30.5% vs 0.0%). ARKK’s exposure to Healthcare and Communication Services stocks is 25.93% higher and 25.01% higher respectively (29.47% vs. 3.54% and 25.01% vs. 0.0%). In total, Utilities, Energy, and Financial Services also make up 81.77% less of the fund’s holdings compared to PFF (0.04% vs. 81.81%).

Holdings

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

PFF - Holdings

PFF Holdings Weight
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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Risk Analysis

ARKK PFF
Mean Return 0 0.52
R-squared 0 9.39
Std. Deviation 0 7.87
Alpha 0 3.45
Beta 0 0.81
Sharpe Ratio 0 0.72
Treynor Ratio 0 6.79

The ARK Innovation ETF (ARKK) has a Mean Return of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Standard Deviation is 0 while ARKK’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.

The iShares Preferred and Income Securities ETF (PFF) has a Standard Deviation of 7.87 with a Sharpe Ratio of 0.72 and a R-squared of 9.39. Its Mean Return is 0.52 while PFF’s Alpha is 3.45. Furthermore, the fund has a Treynor Ratio of 6.79 and a Beta of 0.81.

ARKK’s Mean Return is 0.52 points lower than that of PFF and its R-squared is 9.39 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than PFF. The Alpha and Beta of ARKK are 3.45 points lower and 0.81 points lower than PFF’s Alpha and Beta.

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Performance

Annual Returns

ARKK vs. PFF - Annual Returns

Year ARKK PFF
2020 152.52% 7.94%
2019 35.73% 15.62%
2018 3.58% -4.77%
2017 87.38% 8.33%
2016 -1.96% 1.26%
2015 3.76% 4.62%
2014 0.0% 13.45%
2013 0.0% -0.59%
2012 0.0% 18.25%
2011 0.0% -2.2%
2010 0.0% 13.96%

ARKK had its best year in 2020 with an annual return of 152.52%. ARKK’s worst year over the past decade yielded -1.96% and occurred in 2016. In most years the ARK Innovation ETF provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 3.58% 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.

Portfolio Growth

ARKK vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ARKK $10,000 $65,218 55.45%
PFF $10,000 $13,036 6.90%

A $10,000 investment in ARKK would have resulted in a final balance of $65,218. This is a profit of $55,218 over 5 years and amounts to a compound annual growth rate (CAGR) of 55.45%.

With a $10,000 investment in PFF, the end total would have been $13,036. This equates to a $3,036 profit over 5 years and a compound annual growth rate (CAGR) of 6.90%.

ARKK’s CAGR is 48.55 percentage points higher than that of PFF and as a result, would have yielded $52,182 more on a $10,000 investment. Thus, ARKK outperformed PFF by 48.55% annually.


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