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PFF vs. VBK: What’s The Difference?

The iShares Preferred and Income Securities ETF (PFF) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between PFF and VBK? And which fund is better?

The expense ratio of PFF is 0.39 percentage points higher than VBK’s (0.46% vs. 0.07%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than VBK over the past 11 years.

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

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Summary

PFFVBK
NameiShares Preferred and Income Securities ETFVanguard Small-Cap Growth Index Fund ETF Shares
CategoryPreferred StockSmall Growth
IssueriSharesVanguard
AUM19.8B37.89B
Avg. Return6.90%16.53%
Div. Yield4.47%0.45%
Expense Ratio0.46%0.07%

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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

PFF’s dividend yield is 4.02% higher than that of VBK (4.47% vs. 0.45%). Also, PFF yielded on average 9.63% less per year over the past decade (6.90% vs. 16.53%). The expense ratio of PFF is 0.39 percentage points higher than VBK’s (0.46% vs. 0.07%).

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Fund Composition

Industry Exposure

PFF vs. VBK - Industry Exposure

PFFVBK
Technology0.0%27.87%
Industrials10.27%13.19%
Energy0.0%1.77%
Communication Services0.0%3.24%
Utilities81.81%0.32%
Healthcare3.54%23.24%
Consumer Defensive0.0%3.83%
Real Estate0.65%7.87%
Financial Services0.0%4.05%
Consumer Cyclical0.0%12.13%
Basic Materials3.74%2.49%

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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

PFF is 81.49% more exposed to the Utilities sector than VBK (81.81% vs 0.32%). PFF’s exposure to Industrials and Basic Materials stocks is 2.92% lower and 1.25% higher respectively (10.27% vs. 13.19% and 3.74% vs. 2.49%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 11.12% less of the fund’s holdings compared to VBK (0.00% vs. 11.12%).

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%.

VBK - Holdings

VBK HoldingsWeight
Charles River Laboratories International Inc0.78%
Pool Corp0.73%
Bio-Techne Corp0.73%
Avantor Inc0.73%
PerkinElmer Inc0.72%
Entegris Inc0.7%
PTC Inc0.62%
Fair Isaac Corp0.57%
Bill.com Holdings Inc Ordinary Shares0.56%
Avalara Inc0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

PFFVBK
Mean Return0.521.22
R-squared9.3980.56
Std. Deviation7.8717.95
Alpha3.45-2.81
Beta0.811.18
Sharpe Ratio0.720.78
Treynor Ratio6.7911.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Sharpe Ratio of 0.78 with a Mean Return of 1.22 and a Standard Deviation of 17.95. Its Beta is 1.18 while VBK’s Alpha is -2.81. Furthermore, the fund has a R-squared of 80.56 and a Treynor Ratio of 11.18.

PFF’s Mean Return is 0.70 points lower than that of VBK and its R-squared is 71.17 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than VBK. The Alpha and Beta of PFF are 6.26 points higher and 0.37 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

PFF vs. VBK - Annual Returns

YearPFFVBK
20207.94%35.29%
201915.62%32.75%
2018-4.77%-5.68%
20178.33%21.9%
20161.26%10.74%
20154.62%-2.51%
201413.45%4.02%
2013-0.59%38.18%
201218.25%17.67%
2011-2.2%-1.43%
201013.96%30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

PFF vs. VBK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
PFF$10,000$20,2726.90%
VBK$10,000$48,63916.53%

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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

PFF’s CAGR is 9.63 percentage points lower than that of VBK and as a result, would have yielded $28,367 less on a $10,000 investment. Thus, PFF performed worse than VBK by 9.63% annually.


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