EFA vs. PFF: What’s The Difference?

The iShares MSCI EAFE ETF (EFA) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between EFA and PFF? And which fund is better?

The expense ratio of EFA is 0.14 percentage points lower than PFF’s (0.32% vs. 0.46%). EFA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than PFF over the past ten years.

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

Summary

EFA PFF
Name iShares MSCI EAFE ETF iShares Preferred and Income Securities ETF
Category Foreign Large Blend Preferred Stock
Issuer iShares iShares
AUM 56.77B 19.8B
Avg. Return 6.47% 6.90%
Div. Yield 2.28% 4.47%
Expense Ratio 0.32% 0.46%

The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.

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%.

EFA’s dividend yield is 2.19% lower than that of PFF (2.28% vs. 4.47%). Also, EFA yielded on average 0.43% less per year over the past decade (6.47% vs. 6.90%). The expense ratio of EFA is 0.14 percentage points lower than PFF’s (0.32% vs. 0.46%).

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Fund Composition

Industry Exposure

EFA vs. PFF - Industry Exposure

EFA PFF
Technology 9.68% 0.0%
Industrials 15.01% 10.27%
Energy 3.51% 0.0%
Communication Services 5.68% 0.0%
Utilities 3.35% 81.81%
Healthcare 12.8% 3.54%
Consumer Defensive 10.56% 0.0%
Real Estate 3.01% 0.65%
Financial Services 16.88% 0.0%
Consumer Cyclical 11.62% 0.0%
Basic Materials 7.91% 3.74%

The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.

EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.

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%.

EFA is 16.88% more exposed to the Financial Services sector than PFF (16.88% vs 0.0%). EFA’s exposure to Industrials and Healthcare stocks is 4.74% higher and 9.26% higher respectively (15.01% vs. 10.27% and 12.8% vs. 3.54%). In total, Utilities, Energy, and Communication Services also make up 69.27% less of the fund’s holdings compared to PFF (12.54% vs. 81.81%).

Holdings

EFA - Holdings

EFA Holdings Weight
Nestle SA 2.11%
ASML Holding NV 1.69%
Roche Holding AG 1.55%
LVMH Moet Hennessy Louis Vuitton SE 1.28%
Novartis AG 1.19%
Toyota Motor Corp 1.09%
AstraZeneca PLC 0.92%
Unilever PLC 0.9%
AIA Group Ltd 0.88%
SAP SE 0.86%

EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.

Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.

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

EFA PFF
Mean Return 0.57 0.52
R-squared 96.78 9.39
Std. Deviation 15.01 7.87
Alpha 0.47 3.45
Beta 0.98 0.81
Sharpe Ratio 0.41 0.72
Treynor Ratio 5.33 6.79

The iShares MSCI EAFE ETF (EFA) has a Sharpe Ratio of 0.41 with a R-squared of 96.78 and a Treynor Ratio of 5.33. Its Mean Return is 0.57 while EFA’s Standard Deviation is 15.01. Furthermore, the fund has a Alpha of 0.47 and a Beta of 0.98.

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

EFA’s Mean Return is 0.05 points higher than that of PFF and its R-squared is 87.39 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than PFF. The Alpha and Beta of EFA are 2.98 points lower and 0.17 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

EFA vs. PFF - Annual Returns

Year EFA PFF
2020 7.92% 7.94%
2019 21.94% 15.62%
2018 -13.83% -4.77%
2017 24.94% 8.33%
2016 0.96% 1.26%
2015 -0.9% 4.62%
2014 -5.04% 13.45%
2013 22.62% -0.59%
2012 17.22% 18.25%
2011 -12.18% -2.2%
2010 7.52% 13.96%

EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% 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

EFA vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EFA $10,000 $18,269 6.47%
PFF $10,000 $20,272 6.90%

A $10,000 investment in EFA would have resulted in a final balance of $18,269. This is a profit of $8,269 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.47%.

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%.

EFA’s CAGR is 0.43 percentage points lower than that of PFF and as a result, would have yielded $2,003 less on a $10,000 investment. Thus, EFA performed worse than PFF by 0.43% annually.


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