PFF vs. VHT: What’s The Difference?

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

The expense ratio of PFF is 0.36 percentage points higher than VHT’s (0.46% vs. 0.1%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than VHT over the past 11 years.

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

Summary

PFF VHT
Name iShares Preferred and Income Securities ETF Vanguard Health Care Index Fund ETF Shares
Category Preferred Stock Health
Issuer iShares Vanguard
AUM 19.8B 17.94B
Avg. Return 6.90% 16.04%
Div. Yield 4.47% 1.15%
Expense Ratio 0.46% 0.1%

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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

PFF’s dividend yield is 3.32% higher than that of VHT (4.47% vs. 1.15%). Also, PFF yielded on average 9.14% less per year over the past decade (6.90% vs. 16.04%). The expense ratio of PFF is 0.36 percentage points higher than VHT’s (0.46% vs. 0.1%).

Fund Composition

Industry Exposure

PFF vs. VHT - Industry Exposure

PFF VHT
Technology 0.0% 0.05%
Industrials 10.27% 0.05%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 81.81% 0.0%
Healthcare 3.54% 99.57%
Consumer Defensive 0.0% 0.0%
Real Estate 0.65% 0.0%
Financial Services 0.0% 0.02%
Consumer Cyclical 0.0% 0.0%
Basic Materials 3.74% 0.31%

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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

PFF is 81.81% more exposed to the Utilities sector than VHT (81.81% vs 0.0%). PFF’s exposure to Industrials and Basic Materials stocks is 10.22% higher and 3.43% higher respectively (10.27% vs. 0.05% and 3.74% vs. 0.31%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 0.02% less of the fund’s holdings compared to VHT (0.00% vs. 0.02%).

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%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

Risk Analysis

PFF VHT
Mean Return 0.52 1.33
R-squared 9.39 59.86
Std. Deviation 7.87 13.58
Alpha 3.45 7.99
Beta 0.81 0.75
Sharpe Ratio 0.72 1.13
Treynor Ratio 6.79 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a Alpha of 7.99 and a R-squared of 59.86. Its Standard Deviation is 13.58 while VHT’s Sharpe Ratio is 1.13. Furthermore, the fund has a Beta of 0.75 and a Treynor Ratio of 20.74.

PFF’s Mean Return is 0.81 points lower than that of VHT and its R-squared is 50.47 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than VHT. The Alpha and Beta of PFF are 4.54 points lower and 0.06 points higher than VHT’s Alpha and Beta.

Performance

Annual Returns

PFF vs. VHT - Annual Returns

Year PFF VHT
2020 7.94% 18.21%
2019 15.62% 21.97%
2018 -4.77% 5.55%
2017 8.33% 23.34%
2016 1.26% -3.33%
2015 4.62% 7.22%
2014 13.45% 25.38%
2013 -0.59% 42.67%
2012 18.25% 19.1%
2011 -2.2% 10.57%
2010 13.96% 5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

PFF vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
PFF $10,000 $20,272 6.90%
VHT $10,000 $48,464 16.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

PFF’s CAGR is 9.14 percentage points lower than that of VHT and as a result, would have yielded $28,192 less on a $10,000 investment. Thus, PFF performed worse than VHT by 9.14% annually.


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