SCHX vs. PFF: What’s The Difference?

The Schwab U.S. Large-Cap ETF (SCHX) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between SCHX and PFF? And which fund is better?

The expense ratio of SCHX is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%). SCHX also has a higher exposure to the technology sector and a higher standard deviation. Overall, SCHX has provided higher returns than PFF over the past ten years.

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

Summary

SCHX PFF
Name Schwab U.S. Large-Cap ETF iShares Preferred and Income Securities ETF
Category Large Blend Preferred Stock
Issuer Schwab ETFs iShares
AUM 30.89B 19.8B
Avg. Return 14.60% 6.90%
Div. Yield 1.41% 4.47%
Expense Ratio 0.03% 0.46%

The Schwab U.S. Large-Cap ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.

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%.

SCHX’s dividend yield is 3.06% lower than that of PFF (1.41% vs. 4.47%). Also, SCHX yielded on average 7.71% more per year over the past decade (14.60% vs. 6.90%). The expense ratio of SCHX is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%).

Fund Composition

Industry Exposure

SCHX vs. PFF - Industry Exposure

SCHX PFF
Technology 25.13% 0.0%
Industrials 8.65% 10.27%
Energy 2.72% 0.0%
Communication Services 11.26% 0.0%
Utilities 2.37% 81.81%
Healthcare 13.04% 3.54%
Consumer Defensive 5.97% 0.0%
Real Estate 3.13% 0.65%
Financial Services 13.82% 0.0%
Consumer Cyclical 11.63% 0.0%
Basic Materials 2.28% 3.74%

The Schwab U.S. Large-Cap ETF (SCHX) has the most exposure to the Technology sector at 25.13%. This is followed by Financial Services and Healthcare at 13.82% and 13.04% respectively. Utilities (2.37%), Energy (2.72%), and Real Estate (3.13%) only make up 8.22% of the fund’s total assets.

SCHX’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.65%, 11.26%, 11.63%, and 13.04%.

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%.

SCHX is 25.13% more exposed to the Technology sector than PFF (25.13% vs 0.0%). SCHX’s exposure to Financial Services and Healthcare stocks is 13.82% higher and 9.50% higher respectively (13.82% vs. 0.0% and 13.04% vs. 3.54%). In total, Utilities, Energy, and Real Estate also make up 74.24% less of the fund’s holdings compared to PFF (8.22% vs. 82.46%).

Holdings

SCHX - Holdings

SCHX Holdings Weight
Apple Inc 5.37%
Microsoft Corp 5.1%
Amazon.com Inc 3.69%
Facebook Inc A 2.08%
Alphabet Inc A 1.84%
Alphabet Inc Class C 1.78%
Berkshire Hathaway Inc Class B 1.32%
Tesla Inc 1.31%
NVIDIA Corp 1.25%
JPMorgan Chase & Co 1.18%

SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.

Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.

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%.

Risk Analysis

SCHX PFF
Mean Return 1.24 0.52
R-squared 99.83 9.39
Std. Deviation 13.8 7.87
Alpha -0.14 3.45
Beta 1.02 0.81
Sharpe Ratio 1.03 0.72
Treynor Ratio 14.06 6.79

The Schwab U.S. Large-Cap ETF (SCHX) has a Treynor Ratio of 14.06 with a R-squared of 99.83 and a Beta of 1.02. Its Mean Return is 1.24 while SCHX’s Standard Deviation is 13.8. Furthermore, the fund has a Alpha of -0.14 and a Sharpe Ratio of 1.03.

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

SCHX’s Mean Return is 0.72 points higher than that of PFF and its R-squared is 90.44 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than PFF. The Alpha and Beta of SCHX are 3.59 points lower and 0.21 points higher than PFF’s Alpha and Beta.

Performance

Annual Returns

SCHX vs. PFF - Annual Returns

Year SCHX PFF
2020 20.9% 7.94%
2019 31.4% 15.62%
2018 -4.52% -4.77%
2017 21.91% 8.33%
2016 11.78% 1.26%
2015 1.02% 4.62%
2014 13.33% 13.45%
2013 32.54% -0.59%
2012 16.06% 18.25%
2011 1.61% -2.2%
2010 15.88% 13.96%

SCHX had its best year in 2013 with an annual return of 32.54%. SCHX’s worst year over the past decade yielded -4.52% and occurred in 2018. In most years the Schwab U.S. Large-Cap ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.33%, 15.88%, and 16.06% 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.

Portfolio Growth

SCHX vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHX $10,000 $36,987 14.60%
PFF $10,000 $17,789 6.90%

A $10,000 investment in SCHX would have resulted in a final balance of $36,987. This is a profit of $26,987 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.60%.

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%.

SCHX’s CAGR is 7.71 percentage points higher than that of PFF and as a result, would have yielded $19,198 more on a $10,000 investment. Thus, SCHX outperformed PFF by 7.71% annually.


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