The Schwab U.S. TIPS ETF (SCHP) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between SCHP and PFF? And which fund is better?
The expense ratio of SCHP is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%). SCHP is mostly comprised of AAA bonds while PFF has a high exposure to the utilities sector. Overall, SCHP has provided lower returns than PFF over the past 10 years.
In this article, we’ll compare SCHP vs. PFF. We’ll look at industry exposure and performance, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss SCHP’s and PFF’s fund composition, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||Schwab U.S. TIPS ETF||iShares Preferred and Income Securities ETF|
|Category||Inflation-Protected Bond||Preferred Stock|
The Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.
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%.
SCHP’s dividend yield is 2.50% lower than that of PFF (1.97% vs. 4.47%). Also, SCHP yielded on average 2.98% less per year over the past decade (3.92% vs. 6.90%). The expense ratio of SCHP is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%).
|SCHP Bond Sectors||Weight|
SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
|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%.
The Schwab U.S. TIPS ETF (SCHP) has a Standard Deviation of 4.32 with a Treynor Ratio of 2.31 and a R-squared of 66.16. Its Sharpe Ratio is 0.64 while SCHP’s Alpha is -0.5. Furthermore, the fund has a Beta of 1.17 and a Mean Return of 0.28.
The iShares Preferred and Income Securities ETF (PFF) has a Standard Deviation of 7.87 with a Mean Return of 0.52 and a Treynor Ratio of 6.79. Its Sharpe Ratio is 0.72 while PFF’s Alpha is 3.45. Furthermore, the fund has a R-squared of 9.39 and a Beta of 0.81.
SCHP’s Mean Return is 0.24 points lower than that of PFF and its R-squared is 56.77 points higher. With a Standard Deviation of 4.32, SCHP is slightly less volatile than PFF. The Alpha and Beta of SCHP are 3.95 points lower and 0.36 points higher than PFF’s Alpha and Beta.
SCHP had its best year in 2011 with an annual return of 13.38%. SCHP’s worst year over the past decade yielded -8.66% and occurred in 2013. In most years the Schwab U.S. TIPS ETF provided moderate returns such as in 2017, 2014, and 2016 where annual returns amounted to 2.95%, 3.56%, and 4.6% respectively.
The year 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in SCHP would have resulted in a final balance of $14,418. This is a profit of $4,418 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.92%.
With a $10,000 investment in PFF, the end total would have been $17,789. This equates to a $7,789 profit over 10 years and a compound annual growth rate (CAGR) of 6.90%.
SCHP’s CAGR is 2.98 percentage points lower than that of PFF and as a result, would have yielded $3,371 less on a $10,000 investment. Thus, SCHP performed worse than PFF by 2.98% annually.
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