PFF vs. SCHA: What’s The Difference?

The iShares Preferred and Income Securities ETF (PFF) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between PFF and SCHA? And which fund is better?

The expense ratio of PFF is 0.42 percentage points higher than SCHA’s (0.46% vs. 0.04%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than SCHA over the past 10 years.

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

Summary

PFF SCHA
Name iShares Preferred and Income Securities ETF Schwab U.S. Small-Cap ETF
Category Preferred Stock Small Blend
Issuer iShares Schwab ETFs
AUM 19.8B 16.51B
Avg. Return 6.90% 12.62%
Div. Yield 4.47% 0.98%
Expense Ratio 0.46% 0.04%

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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

PFF’s dividend yield is 3.49% higher than that of SCHA (4.47% vs. 0.98%). Also, PFF yielded on average 5.73% less per year over the past decade (6.90% vs. 12.62%). The expense ratio of PFF is 0.42 percentage points higher than SCHA’s (0.46% vs. 0.04%).

Fund Composition

Industry Exposure

PFF vs. SCHA - Industry Exposure

PFF SCHA
Technology 0.0% 14.91%
Industrials 10.27% 15.37%
Energy 0.0% 3.35%
Communication Services 0.0% 3.5%
Utilities 81.81% 1.83%
Healthcare 3.54% 16.5%
Consumer Defensive 0.0% 3.75%
Real Estate 0.65% 7.83%
Financial Services 0.0% 14.49%
Consumer Cyclical 0.0% 14.48%
Basic Materials 3.74% 3.98%

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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.

SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.

PFF is 79.98% more exposed to the Utilities sector than SCHA (81.81% vs 1.83%). PFF’s exposure to Industrials and Basic Materials stocks is 5.10% lower and 0.24% lower respectively (10.27% vs. 15.37% and 3.74% vs. 3.98%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 21.74% less of the fund’s holdings compared to SCHA (0.00% vs. 21.74%).

Holdings

PFF - 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%.

SCHA - Holdings

SCHA Holdings Weight
AMC Entertainment Holdings Inc Class A 0.67%
Caesars Entertainment Inc 0.51%
Cloudflare Inc 0.48%
NovoCure Ltd 0.45%
Plug Power Inc 0.41%
10x Genomics Inc Ordinary Shares – Class A 0.34%
GameStop Corp Class A 0.28%
RH 0.27%
Penn National Gaming Inc 0.27%
Axon Enterprise Inc 0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

Risk Analysis

PFF SCHA
Mean Return 0.52 1.14
R-squared 9.39 82.26
Std. Deviation 7.87 18.68
Alpha 3.45 -4.65
Beta 0.81 1.25
Sharpe Ratio 0.72 0.7
Treynor Ratio 6.79 9.62

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

The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Alpha of -4.65 and a Standard Deviation of 18.68. Its Sharpe Ratio is 0.7 while SCHA’s Treynor Ratio is 9.62. Furthermore, the fund has a Mean Return of 1.14 and a R-squared of 82.26.

PFF’s Mean Return is 0.62 points lower than that of SCHA and its R-squared is 72.87 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than SCHA. The Alpha and Beta of PFF are 8.10 points higher and 0.44 points lower than SCHA’s Alpha and Beta.

Performance

Annual Returns

PFF vs. SCHA - Annual Returns

Year PFF SCHA
2020 7.94% 19.35%
2019 15.62% 26.54%
2018 -4.77% -11.75%
2017 8.33% 15.04%
2016 1.26% 19.88%
2015 4.62% -4.24%
2014 13.45% 6.53%
2013 -0.59% 39.59%
2012 18.25% 18.24%
2011 -2.2% -2.95%
2010 13.96% 28.31%

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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

PFF vs. SCHA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
PFF $10,000 $17,789 6.90%
SCHA $10,000 $30,035 12.62%

A $10,000 investment in PFF would have resulted in a final balance of $17,789. This is a profit of $7,789 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.90%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

PFF’s CAGR is 5.73 percentage points lower than that of SCHA and as a result, would have yielded $12,246 less on a $10,000 investment. Thus, PFF performed worse than SCHA by 5.73% annually.


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