The iShares Preferred and Income Securities ETF (PFF) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between PFF and DFAC? And which fund is better?
The expense ratio of PFF is 0.27 percentage points higher than DFAC’s (0.46% vs. 0.19%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than DFAC over the past 11 years.
In this article, we’ll compare PFF vs. DFAC. We’ll look at annual returns and portfolio growth, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss PFF’s and DFAC’s risk metrics, performance, and holdings and examine how these affect their overall returns.
Summary
| PFF | DFAC | |
| Name | iShares Preferred and Income Securities ETF | Dimensional U.S. Core Equity 2 ETF |
| Category | Preferred Stock | Large Blend |
| Issuer | iShares | Dimensional Fund Advisors |
| AUM | 19.8B | 13.53B |
| Avg. Return | 6.90% | 13.93% |
| Div. Yield | 4.47% | 1.0% |
| Expense Ratio | 0.46% | 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%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
PFF’s dividend yield is 3.47% higher than that of DFAC (4.47% vs. 1.0%). Also, PFF yielded on average 7.04% less per year over the past decade (6.90% vs. 13.93%). The expense ratio of PFF is 0.27 percentage points higher than DFAC’s (0.46% vs. 0.19%).
Fund Composition
Industry Exposure
| PFF | DFAC | |
| Technology | 0.0% | 22.81% |
| Industrials | 10.27% | 14.13% |
| Energy | 0.0% | 2.67% |
| Communication Services | 0.0% | 7.63% |
| Utilities | 81.81% | 1.54% |
| Healthcare | 3.54% | 12.09% |
| Consumer Defensive | 0.0% | 5.94% |
| Real Estate | 0.65% | 0.37% |
| Financial Services | 0.0% | 16.17% |
| Consumer Cyclical | 0.0% | 13.09% |
| Basic Materials | 3.74% | 3.56% |
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%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.
DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.
PFF is 80.27% more exposed to the Utilities sector than DFAC (81.81% vs 1.54%). PFF’s exposure to Industrials and Basic Materials stocks is 3.86% lower and 0.18% higher respectively (10.27% vs. 14.13% and 3.74% vs. 3.56%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 29.74% less of the fund’s holdings compared to DFAC (0.00% vs. 29.74%).
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%.
| DFAC Holdings | Weight |
| Apple Inc | 4.7% |
| Microsoft Corp | 3.81% |
| Amazon.com Inc | 2.39% |
| Johnson & Johnson | 1.05% |
| Facebook Inc Class A | 1.05% |
| JPMorgan Chase & Co | 1.0% |
| Alphabet Inc Class C | 0.85% |
| Alphabet Inc Class A | 0.84% |
| Berkshire Hathaway Inc Class B | 0.75% |
| Visa Inc Class A | 0.74% |
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
Risk Analysis
| PFF | DFAC | |
| Mean Return | 0.52 | 1.19 |
| R-squared | 9.39 | 95.1 |
| Std. Deviation | 7.87 | 15.55 |
| Alpha | 3.45 | -2.75 |
| Beta | 0.81 | 1.12 |
| Sharpe Ratio | 0.72 | 0.88 |
| Treynor Ratio | 6.79 | 11.85 |
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 R-squared is 9.39 while PFF’s Standard Deviation is 7.87. Furthermore, the fund has a Alpha of 3.45 and a Beta of 0.81.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Beta of 1.12 with a Treynor Ratio of 11.85 and a Alpha of -2.75. Its Sharpe Ratio is 0.88 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Mean Return of 1.19 and a Standard Deviation of 15.55.
PFF’s Mean Return is 0.67 points lower than that of DFAC and its R-squared is 85.71 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than DFAC. The Alpha and Beta of PFF are 6.20 points higher and 0.31 points lower than DFAC’s Alpha and Beta.
Performance
Annual Returns
| Year | PFF | DFAC |
| 2020 | 7.94% | 15.8% |
| 2019 | 15.62% | 29.54% |
| 2018 | -4.77% | -9.43% |
| 2017 | 8.33% | 18.82% |
| 2016 | 1.26% | 16.31% |
| 2015 | 4.62% | -2.53% |
| 2014 | 13.45% | 9.56% |
| 2013 | -0.59% | 37.55% |
| 2012 | 18.25% | 17.93% |
| 2011 | -2.2% | -1.96% |
| 2010 | 13.96% | 21.67% |
PFF had its best year in 2012 with an annual return of 18.25%. PFF’s worst year over the past decade yielded -4.77% and occurred in 2018. In most years the iShares Preferred and Income Securities ETF provided moderate returns such as in 2015, 2020, and 2017 where annual returns amounted to 4.62%, 7.94%, and 8.33% respectively.
The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| PFF | $10,000 | $20,272 | 6.90% |
| DFAC | $10,000 | $38,796 | 13.93% |
A $10,000 investment in PFF would have resulted in a final balance of $20,272. This is a profit of $10,272 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.90%.
With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
PFF’s CAGR is 7.04 percentage points lower than that of DFAC and as a result, would have yielded $18,524 less on a $10,000 investment. Thus, PFF performed worse than DFAC by 7.04% annually.
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