The iShares Preferred and Income Securities ETF (PFF) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between PFF and XLI? And which fund is better?
The expense ratio of PFF is 0.34 percentage points higher than XLI’s (0.46% vs. 0.12%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than XLI over the past 11 years.
In this article, we’ll compare PFF vs. XLI. We’ll look at industry exposure and annual returns, as well as at their performance and holdings. Moreover, I’ll also discuss PFF’s and XLI’s fund composition, portfolio growth, and risk metrics and examine how these affect their overall returns.
|Name||iShares Preferred and Income Securities ETF||Industrial Select Sector SPDR Fund|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.
PFF’s dividend yield is 3.22% higher than that of XLI (4.47% vs. 1.25%). Also, PFF yielded on average 7.55% less per year over the past decade (6.90% vs. 14.44%). The expense ratio of PFF is 0.34 percentage points higher than XLI’s (0.46% vs. 0.12%).
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.
PFF is 81.81% more exposed to the Utilities sector than XLI (81.81% vs 0.0%). PFF’s exposure to Industrials and Basic Materials stocks is 87.22% lower and 3.74% higher respectively (10.27% vs. 97.49% and 3.74% vs. 0.0%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 0.00% less of the fund’s holdings compared to XLI (0.00% vs. 0.00%).
|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%.
|Honeywell International Inc||4.9%|
|United Parcel Service Inc Class B||4.84%|
|Union Pacific Corp||4.7%|
|Raytheon Technologies Corp||4.16%|
|General Electric Co||3.8%|
|Deere & Co||3.54%|
|Lockheed Martin Corp||2.98%|
XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.
Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.
The iShares Preferred and Income Securities ETF (PFF) has a Beta of 0.81 with a Treynor Ratio of 6.79 and a R-squared of 9.39. 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 Alpha of 3.45.
The Industrial Select Sector SPDR Fund (XLI) has a Standard Deviation of 17.13 with a Alpha of 2.38 and a Treynor Ratio of 11.34. Its Beta is 1.08 while XLI’s Sharpe Ratio is 0.76. Furthermore, the fund has a R-squared of 78.97 and a Mean Return of 1.14.
PFF’s Mean Return is 0.62 points lower than that of XLI and its R-squared is 69.58 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than XLI. The Alpha and Beta of PFF are 1.07 points higher and 0.27 points lower than XLI’s Alpha and Beta.
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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.
PFF’s CAGR is 7.55 percentage points lower than that of XLI and as a result, would have yielded $19,581 less on a $10,000 investment. Thus, PFF performed worse than XLI by 7.55% annually.
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