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PFF vs. IWN: What’s The Difference?

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

The expense ratio of PFF is 0.22 percentage points higher than IWN’s (0.46% vs. 0.24%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than IWN over the past 11 years.

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

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Summary

PFFIWN
NameiShares Preferred and Income Securities ETFiShares Russell 2000 Value ETF
CategoryPreferred StockSmall Value
IssueriSharesiShares
AUM19.8B15.48B
Avg. Return6.90%10.96%
Div. Yield4.47%1.26%
Expense Ratio0.46%0.24%

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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

PFF’s dividend yield is 3.21% higher than that of IWN (4.47% vs. 1.26%). Also, PFF yielded on average 4.06% less per year over the past decade (6.90% vs. 10.96%). The expense ratio of PFF is 0.22 percentage points higher than IWN’s (0.46% vs. 0.24%).

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Fund Composition

Industry Exposure

PFF vs. IWN - Industry Exposure

PFFIWN
Technology0.0%6.02%
Industrials10.27%14.58%
Energy0.0%5.84%
Communication Services0.0%4.17%
Utilities81.81%4.69%
Healthcare3.54%10.94%
Consumer Defensive0.0%3.77%
Real Estate0.65%14.36%
Financial Services0.0%22.97%
Consumer Cyclical0.0%8.39%
Basic Materials3.74%4.29%

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 iShares Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

PFF is 77.12% more exposed to the Utilities sector than IWN (81.81% vs 4.69%). PFF’s exposure to Industrials and Basic Materials stocks is 4.31% lower and 0.55% lower respectively (10.27% vs. 14.58% and 3.74% vs. 4.29%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 30.91% less of the fund’s holdings compared to IWN (0.00% vs. 30.91%).

Holdings

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%.

IWN - Holdings

IWN HoldingsWeight
AMC Entertainment Holdings Inc Class A1.06%
Tenet Healthcare Corp0.47%
Stag Industrial Inc0.47%
Ovintiv Inc0.45%
EMCOR Group Inc0.42%
Valley National Bancorp0.37%
Chesapeake Energy Corp Ordinary Shares – New0.37%
Agree Realty Corp0.36%
Macy’s Inc0.35%
Essent Group Ltd0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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Risk Analysis

PFFIWN
Mean Return0.521.01
R-squared9.3972.64
Std. Deviation7.8719.28
Alpha3.45-6.32
Beta0.811.21
Sharpe Ratio0.720.59
Treynor Ratio6.798.3

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

The iShares Russell 2000 Value ETF (IWN) has a Beta of 1.21 with a Treynor Ratio of 8.3 and a Alpha of -6.32. Its Sharpe Ratio is 0.59 while IWN’s Mean Return is 1.01. Furthermore, the fund has a Standard Deviation of 19.28 and a R-squared of 72.64.

PFF’s Mean Return is 0.49 points lower than that of IWN and its R-squared is 63.25 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than IWN. The Alpha and Beta of PFF are 9.77 points higher and 0.40 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

PFF vs. IWN - Annual Returns

YearPFFIWN
20207.94%4.5%
201915.62%22.17%
2018-4.77%-12.94%
20178.33%7.73%
20161.26%31.64%
20154.62%-7.53%
201413.45%4.13%
2013-0.59%34.3%
201218.25%17.92%
2011-2.2%-5.64%
201013.96%24.29%

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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

PFF vs. IWN - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
PFF$10,000$20,2726.90%
IWN$10,000$28,18910.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

PFF’s CAGR is 4.06 percentage points lower than that of IWN and as a result, would have yielded $7,917 less on a $10,000 investment. Thus, PFF performed worse than IWN by 4.06% annually.


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