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PFF vs. VOE: What’s The Difference?

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

The expense ratio of PFF is 0.39 percentage points higher than VOE’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 VOE over the past 11 years.

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

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Summary

PFFVOE
NameiShares Preferred and Income Securities ETFVanguard Mid-Cap Value Index Fund ETF Shares
CategoryPreferred StockMid-Cap Value
IssueriSharesVanguard
AUM19.8B26.78B
Avg. Return6.90%12.52%
Div. Yield4.47%1.87%
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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.

PFF’s dividend yield is 2.60% higher than that of VOE (4.47% vs. 1.87%). Also, PFF yielded on average 5.63% less per year over the past decade (6.90% vs. 12.52%). The expense ratio of PFF is 0.39 percentage points higher than VOE’s (0.46% vs. 0.07%).

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Fund Composition

Industry Exposure

PFF vs. VOE - Industry Exposure

PFFVOE
Technology0.0%9.85%
Industrials10.27%9.4%
Energy0.0%5.69%
Communication Services0.0%5.27%
Utilities81.81%10.93%
Healthcare3.54%7.04%
Consumer Defensive0.0%4.85%
Real Estate0.65%11.48%
Financial Services0.0%18.26%
Consumer Cyclical0.0%11.8%
Basic Materials3.74%5.44%

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 Mid-Cap Value Index Fund ETF Shares (VOE) has the most exposure to the Financial Services sector at 18.26%. This is followed by Consumer Cyclical and Real Estate at 11.8% and 11.48% respectively. Communication Services (5.27%), Basic Materials (5.44%), and Energy (5.69%) only make up 16.40% of the fund’s total assets.

VOE’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Technology, Utilities, and Real Estate stocks at 7.04%, 9.4%, 9.85%, 10.93%, and 11.48%.

PFF is 70.88% more exposed to the Utilities sector than VOE (81.81% vs 10.93%). PFF’s exposure to Industrials and Basic Materials stocks is 0.87% higher and 1.70% lower respectively (10.27% vs. 9.4% and 3.74% vs. 5.44%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 28.38% less of the fund’s holdings compared to VOE (0.00% vs. 28.38%).

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%.

VOE - Holdings

VOE HoldingsWeight
Carrier Global Corp Ordinary Shares1.28%
International Flavors & Fragrances Inc1.13%
Motorola Solutions Inc1.12%
Discover Financial Services1.09%
Welltower Inc1.05%
Corteva Inc0.99%
Valero Energy Corp0.97%
Corning Inc0.95%
Willis Towers Watson PLC0.9%
D.R. Horton Inc0.89%

VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.

Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.

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Risk Analysis

PFFVOE
Mean Return0.521.05
R-squared9.3988.76
Std. Deviation7.8715.98
Alpha3.45-3.77
Beta0.811.11
Sharpe Ratio0.720.75
Treynor Ratio6.7910.19

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

The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Treynor Ratio of 10.19 with a R-squared of 88.76 and a Alpha of -3.77. Its Standard Deviation is 15.98 while VOE’s Beta is 1.11. Furthermore, the fund has a Mean Return of 1.05 and a Sharpe Ratio of 0.75.

PFF’s Mean Return is 0.53 points lower than that of VOE and its R-squared is 79.37 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than VOE. The Alpha and Beta of PFF are 7.22 points higher and 0.30 points lower than VOE’s Alpha and Beta.

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Performance

Annual Returns

PFF vs. VOE - Annual Returns

YearPFFVOE
20207.94%2.5%
201915.62%27.98%
2018-4.77%-12.41%
20178.33%17.05%
20161.26%15.26%
20154.62%-1.8%
201413.45%13.98%
2013-0.59%37.65%
201218.25%16.04%
2011-2.2%-0.32%
201013.96%21.83%

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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.

Portfolio Growth

PFF vs. VOE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
PFF$10,000$20,2726.90%
VOE$10,000$33,65512.52%

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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.

PFF’s CAGR is 5.63 percentage points lower than that of VOE and as a result, would have yielded $13,383 less on a $10,000 investment. Thus, PFF performed worse than VOE by 5.63% annually.


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