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IWM vs. PFF: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between IWM and PFF? And which fund is better?

The expense ratio of IWM is 0.27 percentage points lower than PFF’s (0.19% vs. 0.46%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than PFF over the past ten years.

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

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Summary

IWMPFF
NameiShares Russell 2000 ETFiShares Preferred and Income Securities ETF
CategorySmall BlendPreferred Stock
IssueriSharesiShares
AUM66.48B19.8B
Avg. Return13.52%6.90%
Div. Yield0.86%4.47%
Expense Ratio0.19%0.46%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

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%.

IWM’s dividend yield is 3.61% lower than that of PFF (0.86% vs. 4.47%). Also, IWM yielded on average 6.62% more per year over the past decade (13.52% vs. 6.90%). The expense ratio of IWM is 0.27 percentage points lower than PFF’s (0.19% vs. 0.46%).

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Fund Composition

Industry Exposure

IWM vs. PFF - Industry Exposure

IWMPFF
Technology14.21%0.0%
Industrials14.78%10.27%
Energy3.74%0.0%
Communication Services3.79%0.0%
Utilities2.44%81.81%
Healthcare20.3%3.54%
Consumer Defensive3.65%0.0%
Real Estate8.59%0.65%
Financial Services13.76%0.0%
Consumer Cyclical10.99%0.0%
Basic Materials3.74%3.74%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

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%.

IWM is 16.76% more exposed to the Healthcare sector than PFF (20.3% vs 3.54%). IWM’s exposure to Industrials and Technology stocks is 4.51% higher and 14.21% higher respectively (14.78% vs. 10.27% and 14.21% vs. 0.0%). In total, Consumer Defensive, Basic Materials, and Energy also make up 7.39% more of the fund’s holdings compared to PFF (11.13% vs. 3.74%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

PFF - Holdings

PFF HoldingsWeight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A2.54%
BlackRock Cash Funds Treasury SL Agency2.3%
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 A1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B1.14%
NextEra Energy Inc Unit1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.41.08%
Avantor Inc Ser A0.99%

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

IWMPFF
Mean Return1.120.52
R-squared77.739.39
Std. Deviation18.877.87
Alpha-5.123.45
Beta1.230.81
Sharpe Ratio0.680.72
Treynor Ratio9.566.79

The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Beta of 1.23 and a Treynor Ratio of 9.56. Its Mean Return is 1.12 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a Alpha of -5.12 and a R-squared of 77.73.

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

IWM’s Mean Return is 0.60 points higher than that of PFF and its R-squared is 68.34 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than PFF. The Alpha and Beta of IWM are 8.57 points lower and 0.42 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. PFF - Annual Returns

YearIWMPFF
202019.89%7.94%
201925.42%15.62%
2018-11.02%-4.77%
201714.66%8.33%
201621.36%1.26%
2015-4.33%4.62%
20144.94%13.45%
201338.85%-0.59%
201216.39%18.25%
2011-4.19%-2.2%
201026.76%13.96%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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

IWM vs. PFF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
PFF$10,000$20,2726.90%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

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%.

IWM’s CAGR is 6.62 percentage points higher than that of PFF and as a result, would have yielded $16,414 more on a $10,000 investment. Thus, IWM outperformed PFF by 6.62% annually.


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