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.
Summary
| PFF | XLI | |
| Name | iShares Preferred and Income Securities ETF | Industrial Select Sector SPDR Fund |
| Category | Preferred Stock | Industrials |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 19.8B | 19.33B |
| Avg. Return | 6.90% | 14.44% |
| Div. Yield | 4.47% | 1.25% |
| Expense Ratio | 0.46% | 0.12% |
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%).
Fund Composition
Industry Exposure
| PFF | XLI | |
| Technology | 0.0% | 1.82% |
| Industrials | 10.27% | 97.49% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 0.0% |
| Utilities | 81.81% | 0.0% |
| Healthcare | 3.54% | 0.0% |
| Consumer Defensive | 0.0% | 0.0% |
| Real Estate | 0.65% | 0.0% |
| Financial Services | 0.0% | 0.0% |
| Consumer Cyclical | 0.0% | 0.69% |
| Basic Materials | 3.74% | 0.0% |
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%).
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%.
| XLI Holdings | Weight |
| Honeywell International Inc | 4.9% |
| United Parcel Service Inc Class B | 4.84% |
| Union Pacific Corp | 4.7% |
| Boeing Co | 4.24% |
| Raytheon Technologies Corp | 4.16% |
| Caterpillar Inc | 3.84% |
| General Electric Co | 3.8% |
| 3M Co | 3.7% |
| 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%.
Risk Analysis
| PFF | XLI | |
| Mean Return | 0.52 | 1.14 |
| R-squared | 9.39 | 78.97 |
| Std. Deviation | 7.87 | 17.13 |
| Alpha | 3.45 | 2.38 |
| Beta | 0.81 | 1.08 |
| Sharpe Ratio | 0.72 | 0.76 |
| Treynor Ratio | 6.79 | 11.34 |
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.
Performance
Annual Returns
| Year | PFF | XLI |
| 2020 | 7.94% | 11.0% |
| 2019 | 15.62% | 29.11% |
| 2018 | -4.77% | -13.1% |
| 2017 | 8.33% | 23.85% |
| 2016 | 1.26% | 19.93% |
| 2015 | 4.62% | -4.27% |
| 2014 | 13.45% | 10.44% |
| 2013 | -0.59% | 40.44% |
| 2012 | 18.25% | 14.86% |
| 2011 | -2.2% | -1.01% |
| 2010 | 13.96% | 27.62% |
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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| PFF | $10,000 | $20,272 | 6.90% |
| XLI | $10,000 | $39,853 | 14.44% |
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.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
