IWB vs. PFF: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between IWB and PFF? And which fund is better?

The expense ratio of IWB is 0.31 percentage points lower than PFF’s (0.15% vs. 0.46%). IWB also has a higher exposure to the technology sector and a higher standard deviation. Overall, IWB has provided higher returns than PFF over the past ten years.

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

Summary

IWB PFF
Name iShares Russell 1000 ETF iShares Preferred and Income Securities ETF
Category Large Blend Preferred Stock
Issuer iShares iShares
AUM 30.54B 19.8B
Avg. Return 14.64% 6.90%
Div. Yield 1.14% 4.47%
Expense Ratio 0.15% 0.46%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 3.33% lower than that of PFF (1.14% vs. 4.47%). Also, IWB yielded on average 7.74% more per year over the past decade (14.64% vs. 6.90%). The expense ratio of IWB is 0.31 percentage points lower than PFF’s (0.15% vs. 0.46%).

Fund Composition

Industry Exposure

IWB vs. PFF - Industry Exposure

IWB PFF
Technology 25.33% 0.0%
Industrials 8.88% 10.27%
Energy 2.44% 0.0%
Communication Services 10.83% 0.0%
Utilities 2.36% 81.81%
Healthcare 13.35% 3.54%
Consumer Defensive 5.97% 0.0%
Real Estate 3.34% 0.65%
Financial Services 13.64% 0.0%
Consumer Cyclical 11.85% 0.0%
Basic Materials 2.02% 3.74%

The iShares Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

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%.

IWB is 25.33% more exposed to the Technology sector than PFF (25.33% vs 0.0%). IWB’s exposure to Financial Services and Healthcare stocks is 13.64% higher and 9.81% higher respectively (13.64% vs. 0.0% and 13.35% vs. 3.54%). In total, Utilities, Energy, and Real Estate also make up 74.32% less of the fund’s holdings compared to PFF (8.14% vs. 82.46%).

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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

IWB PFF
Mean Return 1.27 0.52
R-squared 99.73 9.39
Std. Deviation 13.87 7.87
Alpha -0.38 3.45
Beta 1.02 0.81
Sharpe Ratio 1.05 0.72
Treynor Ratio 14.31 6.79

The iShares Russell 1000 ETF (IWB) has a Standard Deviation of 13.87 with a Alpha of -0.38 and a Treynor Ratio of 14.31. Its R-squared is 99.73 while IWB’s Sharpe Ratio is 1.05. Furthermore, the fund has a Beta of 1.02 and a Mean Return of 1.27.

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

IWB’s Mean Return is 0.75 points higher than that of PFF and its R-squared is 90.34 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than PFF. The Alpha and Beta of IWB are 3.83 points lower and 0.21 points higher than PFF’s Alpha and Beta.

Performance

Annual Returns

IWB vs. PFF - Annual Returns

Year IWB PFF
2020 20.8% 7.94%
2019 31.26% 15.62%
2018 -4.91% -4.77%
2017 21.53% 8.33%
2016 11.91% 1.26%
2015 0.82% 4.62%
2014 13.08% 13.45%
2013 32.93% -0.59%
2012 16.27% 18.25%
2011 1.36% -2.2%
2010 15.94% 13.96%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $42,462 14.64%
PFF $10,000 $20,272 6.90%

A $10,000 investment in IWB would have resulted in a final balance of $42,462. This is a profit of $32,462 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 7.74 percentage points higher than that of PFF and as a result, would have yielded $22,190 more on a $10,000 investment. Thus, IWB outperformed PFF by 7.74% annually.


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