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XLV vs. PFF: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between XLV and PFF? And which fund is better?

The expense ratio of XLV is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%). XLV also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, XLV has provided higher returns than PFF over the past ten years.

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

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Summary

XLVPFF
NameHealth Care Select Sector SPDR FundiShares Preferred and Income Securities ETF
CategoryHealthPreferred Stock
IssuerSPDR State Street Global AdvisorsiShares
AUM27.88B19.8B
Avg. Return15.02%6.90%
Div. Yield1.4%4.47%
Expense Ratio0.12%0.46%

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% 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%.

XLV’s dividend yield is 3.07% lower than that of PFF (1.4% vs. 4.47%). Also, XLV yielded on average 8.13% more per year over the past decade (15.02% vs. 6.90%). The expense ratio of XLV is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%).

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Fund Composition

Industry Exposure

XLV vs. PFF - Industry Exposure

XLVPFF
Technology0.0%0.0%
Industrials0.0%10.27%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%81.81%
Healthcare100.0%3.54%
Consumer Defensive0.0%0.0%
Real Estate0.0%0.65%
Financial Services0.0%0.0%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%3.74%

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, 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%.

XLV is 96.46% more exposed to the Healthcare sector than PFF (100.0% vs 3.54%). XLV’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%).

Holdings

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

PFF - Holdings

PFF HoldingsWeight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A2.54%
BlackRock Cash Funds Treasury SL Agency2.3%
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 A1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B1.14%
NextEra Energy Inc Unit1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.41.08%
Avantor Inc Ser A0.99%

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

XLVPFF
Mean Return1.270.52
R-squared58.199.39
Std. Deviation12.947.87
Alpha7.753.45
Beta0.70.81
Sharpe Ratio1.130.72
Treynor Ratio21.16.79

The Health Care Select Sector SPDR Fund (XLV) has a Standard Deviation of 12.94 with a Sharpe Ratio of 1.13 and a R-squared of 58.19. Its Mean Return is 1.27 while XLV’s Alpha is 7.75. Furthermore, the fund has a Treynor Ratio of 21.1 and a Beta of 0.7.

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

XLV’s Mean Return is 0.75 points higher than that of PFF and its R-squared is 48.80 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than PFF. The Alpha and Beta of XLV are 4.30 points higher and 0.11 points lower than PFF’s Alpha and Beta.

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Performance

Annual Returns

XLV vs. PFF - Annual Returns

YearXLVPFF
202013.33%7.94%
201920.63%15.62%
20186.3%-4.77%
201721.7%8.33%
2016-2.83%1.26%
20156.82%4.62%
201425.17%13.45%
201341.24%-0.59%
201217.56%18.25%
201112.44%-2.2%
20102.91%13.96%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% 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

XLV vs. PFF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLV$10,000$44,14715.02%
PFF$10,000$20,2726.90%

A $10,000 investment in XLV would have resulted in a final balance of $44,147. This is a profit of $34,147 over 11 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

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%.

XLV’s CAGR is 8.13 percentage points higher than that of PFF and as a result, would have yielded $23,875 more on a $10,000 investment. Thus, XLV outperformed PFF by 8.13% annually.


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