VTV vs. PFF: What’s The Difference?

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

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

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

Summary

VTV PFF
Name Vanguard Value Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Large Value Preferred Stock
Issuer Vanguard iShares
AUM 125.77B 19.8B
Avg. Return 12.07% 6.90%
Div. Yield 2.15% 4.47%
Expense Ratio 0.04% 0.46%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% 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%.

VTV’s dividend yield is 2.32% lower than that of PFF (2.15% vs. 4.47%). Also, VTV yielded on average 5.18% more per year over the past decade (12.07% vs. 6.90%). The expense ratio of VTV is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%).

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Fund Composition

Industry Exposure

VTV vs. PFF - Industry Exposure

VTV PFF
Technology 7.86% 0.0%
Industrials 12.61% 10.27%
Energy 5.59% 0.0%
Communication Services 5.49% 0.0%
Utilities 5.37% 81.81%
Healthcare 19.84% 3.54%
Consumer Defensive 10.72% 0.0%
Real Estate 3.01% 0.65%
Financial Services 22.81% 0.0%
Consumer Cyclical 3.79% 0.0%
Basic Materials 2.91% 3.74%

The Vanguard Value Index Fund ETF Shares (VTV) has the most exposure to the Financial Services sector at 22.81%. This is followed by Healthcare and Industrials at 19.84% and 12.61% respectively. Real Estate (3.01%), Consumer Cyclical (3.79%), and Utilities (5.37%) only make up 12.17% of the fund’s total assets.

VTV’s mid-section with moderate exposure is comprised of Communication Services, Energy, Technology, Consumer Defensive, and Industrials stocks at 5.49%, 5.59%, 7.86%, 10.72%, and 12.61%.

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%.

VTV is 22.81% more exposed to the Financial Services sector than PFF (22.81% vs 0.0%). VTV’s exposure to Healthcare and Industrials stocks is 16.30% higher and 2.34% higher respectively (19.84% vs. 3.54% and 12.61% vs. 10.27%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 70.29% less of the fund’s holdings compared to PFF (12.17% vs. 82.46%).

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

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

VTV PFF
Mean Return 1.05 0.52
R-squared 92.61 9.39
Std. Deviation 13.78 7.87
Alpha -1.92 3.45
Beta 0.98 0.81
Sharpe Ratio 0.87 0.72
Treynor Ratio 11.94 6.79

The Vanguard Value Index Fund ETF Shares (VTV) has a Treynor Ratio of 11.94 with a Sharpe Ratio of 0.87 and a R-squared of 92.61. Its Alpha is -1.92 while VTV’s Standard Deviation is 13.78. Furthermore, the fund has a Beta of 0.98 and a Mean Return of 1.05.

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

VTV’s Mean Return is 0.53 points higher than that of PFF and its R-squared is 83.22 points higher. With a Standard Deviation of 13.78, VTV is slightly more volatile than PFF. The Alpha and Beta of VTV are 5.37 points lower and 0.17 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. PFF - Annual Returns

Year VTV PFF
2020 2.23% 7.94%
2019 25.85% 15.62%
2018 -5.39% -4.77%
2017 17.12% 8.33%
2016 16.88% 1.26%
2015 -0.89% 4.62%
2014 13.19% 13.45%
2013 33.03% -0.59%
2012 15.19% 18.25%
2011 1.16% -2.2%
2010 14.45% 13.96%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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

VTV vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
PFF $10,000 $20,272 6.90%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

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%.

VTV’s CAGR is 5.18 percentage points higher than that of PFF and as a result, would have yielded $12,891 more on a $10,000 investment. Thus, VTV outperformed PFF by 5.18% annually.


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