The iShares MBS ETF (MBB) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between MBB and PFF? And which fund is better?
The expense ratio of MBB is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%). MBB is mostly comprised of AAA bonds while PFF has a high exposure to the utilities sector. Overall, MBB has provided lower returns than PFF over the past 11 years.
In this article, we’ll compare MBB vs. PFF. We’ll look at performance and fund composition, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss MBB’s and PFF’s risk metrics, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MBS ETF||iShares Preferred and Income Securities ETF|
|Category||Intermediate Government||Preferred Stock|
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% 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%.
MBB’s dividend yield is 2.59% lower than that of PFF (1.88% vs. 4.47%). Also, MBB yielded on average 3.82% less per year over the past decade (3.08% vs. 6.90%). The expense ratio of MBB is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%).
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
|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%.
The iShares MBS ETF (MBB) has a Sharpe Ratio of 0.87 with a Mean Return of 0.2 and a Treynor Ratio of 3.02. Its Standard Deviation is 2.12 while MBB’s R-squared is 74.38. Furthermore, the fund has a Alpha of 0.14 and a Beta of 0.6.
The iShares Preferred and Income Securities ETF (PFF) has a R-squared of 9.39 with a Mean Return of 0.52 and a Sharpe Ratio of 0.72. Its Alpha is 3.45 while PFF’s Treynor Ratio is 6.79. Furthermore, the fund has a Beta of 0.81 and a Standard Deviation of 7.87.
MBB’s Mean Return is 0.32 points lower than that of PFF and its R-squared is 64.99 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than PFF. The Alpha and Beta of MBB are 3.31 points lower and 0.21 points lower than PFF’s Alpha and Beta.
MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in MBB would have resulted in a final balance of $13,906. This is a profit of $3,906 over 11 years and amounts to a compound annual growth rate (CAGR) of 3.08%.
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%.
MBB’s CAGR is 3.82 percentage points lower than that of PFF and as a result, would have yielded $6,366 less on a $10,000 investment. Thus, MBB performed worse than PFF by 3.82% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.