VEA vs. PFF: What’s The Difference?

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between VEA and PFF? And which fund is better?

The expense ratio of VEA is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided higher returns than PFF over the past ten years.

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

Summary

VEA PFF
Name Vanguard FTSE Developed Markets Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Foreign Large Blend Preferred Stock
Issuer Vanguard iShares
AUM 157.48B 19.8B
Avg. Return 7.05% 6.90%
Div. Yield 2.49% 4.47%
Expense Ratio 0.05% 0.46%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.

VEA’s dividend yield is 1.98% lower than that of PFF (2.49% vs. 4.47%). Also, VEA yielded on average 0.15% more per year over the past decade (7.05% vs. 6.90%). The expense ratio of VEA is 0.41 percentage points lower than PFF’s (0.05% vs. 0.46%).

Fund Composition

Industry Exposure

VEA vs. PFF - Industry Exposure

VEA PFF
Technology 11.67% 0.0%
Industrials 15.47% 10.27%
Energy 4.17% 0.0%
Communication Services 5.41% 0.0%
Utilities 3.1% 81.81%
Healthcare 10.6% 3.54%
Consumer Defensive 8.61% 0.0%
Real Estate 4.04% 0.65%
Financial Services 17.39% 0.0%
Consumer Cyclical 11.31% 0.0%
Basic Materials 8.24% 3.74%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.

VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.

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%.

VEA is 17.39% more exposed to the Financial Services sector than PFF (17.39% vs 0.0%). VEA’s exposure to Industrials and Technology stocks is 5.20% higher and 11.67% higher respectively (15.47% vs. 10.27% and 11.67% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 12.97% more of the fund’s holdings compared to PFF (13.62% vs. 0.65%).

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
Samsung Electronics Co Ltd 1.4%
ASML Holding NV 1.16%
Roche Holding AG 1.1%
Toyota Motor Corp 0.92%
LVMH Moet Hennessy Louis Vuitton SE 0.84%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.

LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.

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%.

Performance

Annual Returns

VEA vs. PFF - Annual Returns

Year VEA PFF
2020 10.29% 7.94%
2019 22.08% 15.62%
2018 -14.47% -4.77%
2017 26.44% 8.33%
2016 2.51% 1.26%
2015 -0.21% 4.62%
2014 -5.71% 13.45%
2013 22.12% -0.59%
2012 18.6% 18.25%
2011 -12.57% -2.2%
2010 8.47% 13.96%

VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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

VEA vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $19,290 7.05%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.

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%.

VEA’s CAGR is 0.15 percentage points higher than that of PFF and as a result, would have yielded $982 less on a $10,000 investment. Thus, VEA outperformed PFF by 0.15% annually.


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