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USMV vs. PFF: What’s The Difference?

The iShares MSCI USA Min Vol Factor ETF (USMV) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between USMV and PFF? And which fund is better?

The expense ratio of USMV is 0.31 percentage points lower than PFF’s (0.15% vs. 0.46%). USMV also has a higher exposure to the technology sector and a lower standard deviation. Overall, USMV has provided higher returns than PFF over the past 8 years.

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

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Summary

USMVPFF
NameiShares MSCI USA Min Vol Factor ETFiShares Preferred and Income Securities ETF
CategoryLarge BlendPreferred Stock
IssueriSharesiShares
AUM27.6B19.8B
Avg. Return13.89%6.90%
Div. Yield1.5%4.47%
Expense Ratio0.15%0.46%

The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

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%.

USMV’s dividend yield is 2.97% lower than that of PFF (1.5% vs. 4.47%). Also, USMV yielded on average 7.00% more per year over the past decade (13.89% vs. 6.90%). The expense ratio of USMV is 0.31 percentage points lower than PFF’s (0.15% vs. 0.46%).

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Fund Composition

Industry Exposure

USMV vs. PFF - Industry Exposure

USMVPFF
Technology20.53%0.0%
Industrials10.51%10.27%
Energy0.21%0.0%
Communication Services11.03%0.0%
Utilities6.93%81.81%
Healthcare18.42%3.54%
Consumer Defensive12.82%0.0%
Real Estate2.73%0.65%
Financial Services9.65%0.0%
Consumer Cyclical5.53%0.0%
Basic Materials1.65%3.74%

The iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

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%.

USMV is 20.53% more exposed to the Technology sector than PFF (20.53% vs 0.0%). USMV’s exposure to Healthcare and Consumer Defensive stocks is 14.88% higher and 12.82% higher respectively (18.42% vs. 3.54% and 12.82% vs. 0.0%). In total, Basic Materials, Real Estate, and Consumer Cyclical also make up 5.52% more of the fund’s holdings compared to PFF (9.91% vs. 4.39%).

Holdings

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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%.

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Risk Analysis

USMVPFF
Mean Return00.52
R-squared09.39
Std. Deviation07.87
Alpha03.45
Beta00.81
Sharpe Ratio00.72
Treynor Ratio06.79

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Mean Return of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Standard Deviation is 0 while USMV’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

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

USMV’s Mean Return is 0.52 points lower than that of PFF and its R-squared is 9.39 points lower. With a Standard Deviation of 0, USMV is slightly less volatile than PFF. The Alpha and Beta of USMV are 3.45 points lower and 0.81 points lower than PFF’s Alpha and Beta.

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Performance

Annual Returns

USMV vs. PFF - Annual Returns

YearUSMVPFF
20205.6%7.94%
201927.77%15.62%
20181.36%-4.77%
201718.97%8.33%
201610.5%1.26%
20155.5%4.62%
201416.34%13.45%
201325.11%-0.59%
201211.04%18.25%
20110.0%-2.2%
20100.0%13.96%

USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% 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

USMV vs. PFF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
USMV$10,000$27,60713.89%
PFF$10,000$15,3826.90%

A $10,000 investment in USMV would have resulted in a final balance of $27,607. This is a profit of $17,607 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.89%.

With a $10,000 investment in PFF, the end total would have been $15,382. This equates to a $5,382 profit over 8 years and a compound annual growth rate (CAGR) of 6.90%.

USMV’s CAGR is 7.00 percentage points higher than that of PFF and as a result, would have yielded $12,225 more on a $10,000 investment. Thus, USMV outperformed PFF by 7.00% annually.


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