The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between VB and PFF? And which fund is better?
The expense ratio of VB is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%). VB also has a higher exposure to the technology sector and a higher standard deviation. Overall, VB has provided higher returns than PFF over the past ten years.
In this article, we’ll compare VB vs. PFF. We’ll look at performance and holdings, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss VB’s and PFF’s annual returns, portfolio growth, and fund composition and examine how these affect their overall returns.
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Summary
| VB | PFF | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | iShares Preferred and Income Securities ETF |
| Category | Small Blend | Preferred Stock |
| Issuer | Vanguard | iShares |
| AUM | 137.72B | 19.8B |
| Avg. Return | 14.25% | 6.90% |
| Div. Yield | 1.14% | 4.47% |
| Expense Ratio | 0.05% | 0.46% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% 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%.
VB’s dividend yield is 3.33% lower than that of PFF (1.14% vs. 4.47%). Also, VB yielded on average 7.36% more per year over the past decade (14.25% vs. 6.90%). The expense ratio of VB is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%).
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Fund Composition
Industry Exposure
| VB | PFF | |
| Technology | 16.85% | 0.0% |
| Industrials | 16.11% | 10.27% |
| Energy | 3.67% | 0.0% |
| Communication Services | 2.4% | 0.0% |
| Utilities | 2.19% | 81.81% |
| Healthcare | 14.34% | 3.54% |
| Consumer Defensive | 4.14% | 0.0% |
| Real Estate | 9.56% | 0.65% |
| Financial Services | 13.06% | 0.0% |
| Consumer Cyclical | 13.03% | 0.0% |
| Basic Materials | 4.63% | 3.74% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.
VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.
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%.
VB is 16.85% more exposed to the Technology sector than PFF (16.85% vs 0.0%). VB’s exposure to Industrials and Healthcare stocks is 5.84% higher and 10.80% higher respectively (16.11% vs. 10.27% and 14.34% vs. 3.54%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.21% more of the fund’s holdings compared to PFF (10.21% vs. 0.00%).
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| 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
| VB | PFF | |
| Mean Return | 1.15 | 0.52 |
| R-squared | 85.03 | 9.39 |
| Std. Deviation | 17.82 | 7.87 |
| Alpha | -4.02 | 3.45 |
| Beta | 1.21 | 0.81 |
| Sharpe Ratio | 0.74 | 0.72 |
| Treynor Ratio | 10.15 | 6.79 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Beta of 1.21 and a Treynor Ratio of 10.15. Its Alpha is -4.02 while VB’s R-squared is 85.03. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Mean Return of 1.15.
The iShares Preferred and Income Securities ETF (PFF) has a Treynor Ratio of 6.79 with a Alpha of 3.45 and a Mean Return of 0.52. Its R-squared is 9.39 while PFF’s Sharpe Ratio is 0.72. Furthermore, the fund has a Beta of 0.81 and a Standard Deviation of 7.87.
VB’s Mean Return is 0.63 points higher than that of PFF and its R-squared is 75.64 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than PFF. The Alpha and Beta of VB are 7.47 points lower and 0.40 points higher than PFF’s Alpha and Beta.
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Performance
Annual Returns
| Year | VB | PFF |
| 2020 | 19.08% | 7.94% |
| 2019 | 27.37% | 15.62% |
| 2018 | -9.3% | -4.77% |
| 2017 | 16.24% | 8.33% |
| 2016 | 18.31% | 1.26% |
| 2015 | -3.65% | 4.62% |
| 2014 | 7.51% | 13.45% |
| 2013 | 37.8% | -0.59% |
| 2012 | 18.22% | 18.25% |
| 2011 | -2.68% | -2.2% |
| 2010 | 27.89% | 13.96% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $39,734 | 14.25% |
| PFF | $10,000 | $20,272 | 6.90% |
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
With a $10,000 investment in PFF, the end total would have been $20,272. This equates to a $10,272 profit over 11 years and a compound annual growth rate (CAGR) of 6.90%.
VB’s CAGR is 7.36 percentage points higher than that of PFF and as a result, would have yielded $19,462 more on a $10,000 investment. Thus, VB outperformed PFF by 7.36% annually.
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