The Energy Select Sector SPDR Fund (XLE) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between XLE and PFF? And which fund is better?
The expense ratio of XLE is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than PFF over the past 11 years.
In this article, we’ll compare XLE vs. PFF. We’ll look at holdings and performance, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss XLE’s and PFF’s industry exposure, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||iShares Preferred and Income Securities ETF|
|Category||Equity Energy||Preferred Stock|
|Issuer||SPDR State Street Global Advisors||iShares|
The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.
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%.
XLE’s dividend yield is 0.55% lower than that of PFF (3.92% vs. 4.47%). Also, XLE yielded on average 5.62% less per year over the past decade (1.28% vs. 6.90%). The expense ratio of XLE is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%).
The Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
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%.
XLE is 100.00% more exposed to the Energy sector than PFF (100.0% vs 0.0%). XLE’s exposure to Technology and Industrials stocks is 0.00% lower and 10.27% lower respectively (0.0% vs. 0.0% and 0.0% vs. 10.27%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 0.65% less of the fund’s holdings compared to PFF (0.00% vs. 0.65%).
|Exxon Mobil Corp||23.7%|
|EOG Resources Inc||4.46%|
|Marathon Petroleum Corp||4.17%|
|Pioneer Natural Resources Co||4.08%|
|Kinder Morgan Inc Class P||3.85%|
|Williams Companies Inc||3.5%|
XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.
Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.
|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%.
The Energy Select Sector SPDR Fund (XLE) has a Alpha of -11.98 with a R-squared of 61.84 and a Treynor Ratio of -0.4. Its Standard Deviation is 27.52 while XLE’s Beta is 1.54. Furthermore, the fund has a Sharpe Ratio of 0.12 and a Mean Return of 0.32.
The iShares Preferred and Income Securities ETF (PFF) has a Beta of 0.81 with a Standard Deviation of 7.87 and a Sharpe Ratio of 0.72. Its Alpha is 3.45 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.
XLE’s Mean Return is 0.20 points lower than that of PFF and its R-squared is 52.45 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than PFF. The Alpha and Beta of XLE are 15.43 points lower and 0.73 points higher than PFF’s Alpha and Beta.
XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
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%.
XLE’s CAGR is 5.62 percentage points lower than that of PFF and as a result, would have yielded $10,933 less on a $10,000 investment. Thus, XLE performed worse than PFF by 5.62% annually.
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