The iShares Preferred and Income Securities ETF (PFF) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and IUSB is a iShares N/A fund. So, what’s the difference between PFF and IUSB? And which fund is better?
The expense ratio of PFF is 0.40 percentage points higher than IUSB’s (0.46% vs. 0.06%). PFF also has a high exposure to the utilities sector while IUSB is mostly comprised of AAA bonds. Overall, PFF has provided higher returns than IUSB over the past 6 years.
In this article, we’ll compare PFF vs. IUSB. We’ll look at fund composition and risk metrics, as well as at their holdings and performance. Moreover, I’ll also discuss PFF’s and IUSB’s portfolio growth, industry exposure, and annual returns and examine how these affect their overall returns.
|Name||iShares Preferred and Income Securities ETF||iShares Core Total USD Bond Market ETF|
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 iShares Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.
PFF’s dividend yield is 2.37% higher than that of IUSB (4.47% vs. 2.1%). Also, PFF yielded on average 2.77% more per year over the past decade (6.90% vs. 4.13%). The expense ratio of PFF is 0.40 percentage points higher than IUSB’s (0.46% vs. 0.06%).
|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%.
|IUSB Bond Sectors||Weight|
IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.
The iShares Preferred and Income Securities ETF (PFF) has a Beta of 0.81 with a Alpha of 3.45 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 R-squared of 9.39 and a Standard Deviation of 7.87.
The iShares Core Total USD Bond Market ETF (IUSB) has a Mean Return of 0 with a Treynor Ratio of 0 and a Standard Deviation of 0. Its Sharpe Ratio is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Beta of 0.
PFF’s Mean Return is 0.52 points higher than that of IUSB and its R-squared is 9.39 points higher. With a Standard Deviation of 7.87, PFF is slightly more volatile than IUSB. The Alpha and Beta of PFF are 3.45 points higher and 0.81 points higher than IUSB’s Alpha and Beta.
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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in PFF would have resulted in a final balance of $13,639. This is a profit of $3,639 over 6 years and amounts to a compound annual growth rate (CAGR) of 6.90%.
With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.
PFF’s CAGR is 2.77 percentage points higher than that of IUSB and as a result, would have yielded $935 more on a $10,000 investment. Thus, PFF outperformed IUSB by 2.77% annually.
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