VGK vs. PFF: What’s The Difference?

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

The expense ratio of VGK is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%). VGK also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VGK has provided lower returns than PFF over the past 11 years.

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

Summary

VGK PFF
Name Vanguard FTSE Europe Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Europe Stock Preferred Stock
Issuer Vanguard iShares
AUM 25.7B 19.8B
Avg. Return 6.68% 6.90%
Div. Yield 2.52% 4.47%
Expense Ratio 0.08% 0.46%

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% 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%.

VGK’s dividend yield is 1.95% lower than that of PFF (2.52% vs. 4.47%). Also, VGK yielded on average 0.22% less per year over the past decade (6.68% vs. 6.90%). The expense ratio of VGK is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%).

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Fund Composition

Industry Exposure

VGK vs. PFF - Industry Exposure

VGK PFF
Technology 8.3% 0.0%
Industrials 15.58% 10.27%
Energy 4.3% 0.0%
Communication Services 5.09% 0.0%
Utilities 3.89% 81.81%
Healthcare 13.76% 3.54%
Consumer Defensive 11.39% 0.0%
Real Estate 2.57% 0.65%
Financial Services 15.85% 0.0%
Consumer Cyclical 11.6% 0.0%
Basic Materials 7.67% 3.74%

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

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%.

VGK is 15.85% more exposed to the Financial Services sector than PFF (15.85% vs 0.0%). VGK’s exposure to Industrials and Healthcare stocks is 5.31% higher and 10.22% higher respectively (15.58% vs. 10.27% and 13.76% vs. 3.54%). In total, Utilities, Energy, and Communication Services also make up 68.53% less of the fund’s holdings compared to PFF (13.28% vs. 81.81%).

Holdings

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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%.

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Risk Analysis

VGK PFF
Mean Return 0.61 0.52
R-squared 92.76 9.39
Std. Deviation 16.65 7.87
Alpha 0.45 3.45
Beta 1.06 0.81
Sharpe Ratio 0.4 0.72
Treynor Ratio 5.12 6.79

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Mean Return of 0.61 with a Alpha of 0.45 and a Sharpe Ratio of 0.4. Its Standard Deviation is 16.65 while VGK’s Beta is 1.06. Furthermore, the fund has a R-squared of 92.76 and a Treynor Ratio of 5.12.

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

VGK’s Mean Return is 0.09 points higher than that of PFF and its R-squared is 83.37 points higher. With a Standard Deviation of 16.65, VGK is slightly more volatile than PFF. The Alpha and Beta of VGK are 3.00 points lower and 0.25 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

VGK vs. PFF - Annual Returns

Year VGK PFF
2020 6.5% 7.94%
2019 24.26% 15.62%
2018 -14.79% -4.77%
2017 27.06% 8.33%
2016 -0.59% 1.26%
2015 -1.87% 4.62%
2014 -6.56% 13.45%
2013 24.93% -0.59%
2012 21.01% 18.25%
2011 -11.49% -2.2%
2010 5.01% 13.96%

VGK had its best year in 2017 with an annual return of 27.06%. VGK’s worst year over the past decade yielded -14.79% and occurred in 2018. In most years the Vanguard FTSE Europe Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to -0.59%, 5.01%, and 6.5% 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

VGK vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGK $10,000 $18,350 6.68%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VGK would have resulted in a final balance of $18,350. This is a profit of $8,350 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.68%.

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%.

VGK’s CAGR is 0.22 percentage points lower than that of PFF and as a result, would have yielded $1,922 less on a $10,000 investment. Thus, VGK performed worse than PFF by 0.22% annually.


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