VEU vs. PFF: What’s The Difference?

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

The expense ratio of VEU is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than PFF over the past ten years.

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

Summary

VEU PFF
Name Vanguard FTSE All-World ex-US Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Foreign Large Blend Preferred Stock
Issuer Vanguard iShares
AUM 53.64B 19.8B
Avg. Return 6.64% 6.90%
Div. Yield 2.31% 4.47%
Expense Ratio 0.08% 0.46%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

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%.

VEU’s dividend yield is 2.16% lower than that of PFF (2.31% vs. 4.47%). Also, VEU yielded on average 0.26% less per year over the past decade (6.64% vs. 6.90%). The expense ratio of VEU is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%).

Fund Composition

Industry Exposure

VEU vs. PFF - Industry Exposure

VEU PFF
Technology 12.94% 0.0%
Industrials 12.19% 10.27%
Energy 4.69% 0.0%
Communication Services 7.44% 0.0%
Utilities 2.89% 81.81%
Healthcare 9.34% 3.54%
Consumer Defensive 8.28% 0.0%
Real Estate 3.04% 0.65%
Financial Services 18.46% 0.0%
Consumer Cyclical 12.57% 0.0%
Basic Materials 8.17% 3.74%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

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%.

VEU is 18.46% more exposed to the Financial Services sector than PFF (18.46% vs 0.0%). VEU’s exposure to Technology and Consumer Cyclical stocks is 12.94% higher and 12.57% higher respectively (12.94% vs. 0.0% and 12.57% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 14.52% more of the fund’s holdings compared to PFF (15.17% vs. 0.65%).

Holdings

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

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

VEU PFF
Mean Return 0.56 0.52
R-squared 98.44 9.39
Std. Deviation 15.08 7.87
Alpha 0.28 3.45
Beta 0.99 0.81
Sharpe Ratio 0.4 0.72
Treynor Ratio 5.12 6.79

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Standard Deviation of 15.08 with a Mean Return of 0.56 and a Treynor Ratio of 5.12. Its Sharpe Ratio is 0.4 while VEU’s Beta is 0.99. Furthermore, the fund has a Alpha of 0.28 and a R-squared of 98.44.

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

VEU’s Mean Return is 0.04 points higher than that of PFF and its R-squared is 89.05 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than PFF. The Alpha and Beta of VEU are 3.17 points lower and 0.18 points higher than PFF’s Alpha and Beta.

Performance

Annual Returns

VEU vs. PFF - Annual Returns

Year VEU PFF
2020 11.39% 7.94%
2019 21.63% 15.62%
2018 -13.97% -4.77%
2017 27.27% 8.33%
2016 4.77% 1.26%
2015 -4.67% 4.62%
2014 -4.05% 13.45%
2013 14.5% -0.59%
2012 18.55% 18.25%
2011 -14.25% -2.2%
2010 11.85% 13.96%

VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% 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

VEU vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEU $10,000 $18,507 6.64%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

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%.

VEU’s CAGR is 0.26 percentage points lower than that of PFF and as a result, would have yielded $1,765 less on a $10,000 investment. Thus, VEU performed worse than PFF by 0.26% annually.


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