VGT vs. PFF: What’s The Difference?

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

The expense ratio of VGT is 0.36 percentage points lower than PFF’s (0.1% vs. 0.46%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided higher returns than PFF over the past ten years.

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

Summary

VGT PFF
Name Vanguard Information Technology Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Technology Preferred Stock
Issuer Vanguard iShares
AUM 54.13B 19.8B
Avg. Return 20.84% 6.90%
Div. Yield 0.66% 4.47%
Expense Ratio 0.1% 0.46%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

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%.

VGT’s dividend yield is 3.81% lower than that of PFF (0.66% vs. 4.47%). Also, VGT yielded on average 13.94% more per year over the past decade (20.84% vs. 6.90%). The expense ratio of VGT is 0.36 percentage points lower than PFF’s (0.1% vs. 0.46%).

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Fund Composition

Industry Exposure

VGT vs. PFF - Industry Exposure

VGT PFF
Technology 88.89% 0.0%
Industrials 1.67% 10.27%
Energy 0.0% 0.0%
Communication Services 0.61% 0.0%
Utilities 0.0% 81.81%
Healthcare 0.0% 3.54%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.65%
Financial Services 8.83% 0.0%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 3.74%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

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%.

VGT is 88.89% more exposed to the Technology sector than PFF (88.89% vs 0.0%). VGT’s exposure to Financial Services and Industrials stocks is 8.83% higher and 8.60% lower respectively (8.83% vs. 0.0% and 1.67% vs. 10.27%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.65% less of the fund’s holdings compared to PFF (0.00% vs. 0.65%).

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

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

VGT PFF
Mean Return 1.76 0.52
R-squared 74.84 9.39
Std. Deviation 16.61 7.87
Alpha 10.41 3.45
Beta 1.02 0.81
Sharpe Ratio 1.23 0.72
Treynor Ratio 20.55 6.79

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Standard Deviation of 16.61 with a Beta of 1.02 and a Alpha of 10.41. Its R-squared is 74.84 while VGT’s Sharpe Ratio is 1.23. Furthermore, the fund has a Mean Return of 1.76 and a Treynor Ratio of 20.55.

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

VGT’s Mean Return is 1.24 points higher than that of PFF and its R-squared is 65.45 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than PFF. The Alpha and Beta of VGT are 6.96 points higher and 0.21 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. PFF - Annual Returns

Year VGT PFF
2020 45.94% 7.94%
2019 48.68% 15.62%
2018 2.52% -4.77%
2017 37.07% 8.33%
2016 13.73% 1.26%
2015 5.02% 4.62%
2014 18.01% 13.45%
2013 30.91% -0.59%
2012 14.05% 18.25%
2011 0.52% -2.2%
2010 12.74% 13.96%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% 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

VGT vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $72,718 20.84%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

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%.

VGT’s CAGR is 13.94 percentage points higher than that of PFF and as a result, would have yielded $52,446 more on a $10,000 investment. Thus, VGT outperformed PFF by 13.94% annually.


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