VO vs. PFF: What’s The Difference?

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

The expense ratio of VO is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%). VO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VO has provided higher returns than PFF over the past ten years.

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

Summary

VO PFF
Name Vanguard Mid-Cap Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Mid-Cap Blend Preferred Stock
Issuer Vanguard iShares
AUM 154.08B 19.8B
Avg. Return 14.34% 6.90%
Div. Yield 1.23% 4.47%
Expense Ratio 0.04% 0.46%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

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%.

VO’s dividend yield is 3.24% lower than that of PFF (1.23% vs. 4.47%). Also, VO yielded on average 7.44% more per year over the past decade (14.34% vs. 6.90%). The expense ratio of VO is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%).

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Fund Composition

Industry Exposure

VO vs. PFF - Industry Exposure

VO PFF
Technology 22.01% 0.0%
Industrials 11.92% 10.27%
Energy 3.82% 0.0%
Communication Services 5.61% 0.0%
Utilities 5.12% 81.81%
Healthcare 13.03% 3.54%
Consumer Defensive 3.25% 0.0%
Real Estate 8.67% 0.65%
Financial Services 11.08% 0.0%
Consumer Cyclical 12.12% 0.0%
Basic Materials 3.36% 3.74%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

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%.

VO is 22.01% more exposed to the Technology sector than PFF (22.01% vs 0.0%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 9.49% higher and 12.12% higher respectively (13.03% vs. 3.54% and 12.12% vs. 0.0%). In total, Basic Materials, Energy, and Utilities also make up 73.25% less of the fund’s holdings compared to PFF (12.30% vs. 85.55%).

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
Marvell Technology Inc 0.68%
IQVIA Holdings Inc 0.68%
Chipotle Mexican Grill Inc 0.63%
Veeva Systems Inc Class A 0.62%
Digital Realty Trust Inc 0.62%
Centene Corp 0.62%
Aptiv PLC 0.62%
Carrier Global Corp Ordinary Shares 0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

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

VO PFF
Mean Return 1.14 0.52
R-squared 92.22 9.39
Std. Deviation 15.65 7.87
Alpha -2.71 3.45
Beta 1.11 0.81
Sharpe Ratio 0.83 0.72
Treynor Ratio 11.32 6.79

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Alpha of -2.71 and a Mean Return of 1.14. Its Treynor Ratio is 11.32 while VO’s Beta is 1.11. Furthermore, the fund has a Standard Deviation of 15.65 and a Sharpe Ratio of 0.83.

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

VO’s Mean Return is 0.62 points higher than that of PFF and its R-squared is 82.83 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than PFF. The Alpha and Beta of VO are 6.16 points lower and 0.30 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

VO vs. PFF - Annual Returns

Year VO PFF
2020 18.22% 7.94%
2019 31.04% 15.62%
2018 -9.21% -4.77%
2017 19.25% 8.33%
2016 11.23% 1.26%
2015 -1.34% 4.62%
2014 13.76% 13.45%
2013 35.15% -0.59%
2012 15.98% 18.25%
2011 -1.96% -2.2%
2010 25.57% 13.96%

VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% 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

VO vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $40,404 14.34%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VO would have resulted in a final balance of $40,404. This is a profit of $30,404 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

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%.

VO’s CAGR is 7.44 percentage points higher than that of PFF and as a result, would have yielded $20,132 more on a $10,000 investment. Thus, VO outperformed PFF by 7.44% annually.


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