IGSB vs. PFF: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between IGSB and PFF? And which fund is better?

The expense ratio of IGSB is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%). IGSB is mostly comprised of BBB bonds while PFF has a high exposure to the utilities sector. Overall, IGSB has provided lower returns than PFF over the past 11 years.

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

Summary

IGSB PFF
Name iShares 1-5 Year Investment Grade Corporate Bond ETF iShares Preferred and Income Securities ETF
Category Short-Term Bond Preferred Stock
Issuer iShares iShares
AUM 26.63B 19.8B
Avg. Return 2.51% 6.90%
Div. Yield 2.02% 4.47%
Expense Ratio 0.06% 0.46%

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

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%.

IGSB’s dividend yield is 2.45% lower than that of PFF (2.02% vs. 4.47%). Also, IGSB yielded on average 4.39% less per year over the past decade (2.51% vs. 6.90%). The expense ratio of IGSB is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%).

Fund Composition

Holdings

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

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%.

Risk Analysis

IGSB PFF
Mean Return 0.19 0.52
R-squared 26.13 9.39
Std. Deviation 2 7.87
Alpha 0.69 3.45
Beta 0.34 0.81
Sharpe Ratio 0.82 0.72
Treynor Ratio 4.82 6.79

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a Treynor Ratio of 4.82 and a R-squared of 26.13. Its Beta is 0.34 while IGSB’s Sharpe Ratio is 0.82. Furthermore, the fund has a Standard Deviation of 2 and a Alpha of 0.69.

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

IGSB’s Mean Return is 0.33 points lower than that of PFF and its R-squared is 16.74 points higher. With a Standard Deviation of 2, IGSB is slightly less volatile than PFF. The Alpha and Beta of IGSB are 2.76 points lower and 0.47 points lower than PFF’s Alpha and Beta.

Performance

Annual Returns

IGSB vs. PFF - Annual Returns

Year IGSB PFF
2020 5.26% 7.94%
2019 7.01% 15.62%
2018 1.34% -4.77%
2017 1.41% 8.33%
2016 1.77% 1.26%
2015 0.7% 4.62%
2014 0.74% 13.45%
2013 1.03% -0.59%
2012 3.28% 18.25%
2011 1.34% -2.2%
2010 3.69% 13.96%

IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% 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

IGSB vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IGSB $10,000 $13,103 2.51%
PFF $10,000 $20,272 6.90%

A $10,000 investment in IGSB would have resulted in a final balance of $13,103. This is a profit of $3,103 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.51%.

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%.

IGSB’s CAGR is 4.39 percentage points lower than that of PFF and as a result, would have yielded $7,169 less on a $10,000 investment. Thus, IGSB performed worse than PFF by 4.39% annually.


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