The Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between XLY and PFF? And which fund is better?
The expense ratio of XLY is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%). XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided higher returns than PFF over the past 11 years.
In this article, we’ll compare XLY vs. PFF. We’ll look at portfolio growth and industry exposure, as well as at their risk metrics and performance. Moreover, I’ll also discuss XLY’s and PFF’s holdings, annual returns, and fund composition and examine how these affect their overall returns.
Summary
| XLY | PFF | |
| Name | Consumer Discretionary Select Sector SPDR Fund | iShares Preferred and Income Securities ETF |
| Category | Consumer Cyclical | Preferred Stock |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 20.21B | 19.8B |
| Avg. Return | 18.86% | 6.90% |
| Div. Yield | 0.63% | 4.47% |
| Expense Ratio | 0.12% | 0.46% |
The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% 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%.
XLY’s dividend yield is 3.84% lower than that of PFF (0.63% vs. 4.47%). Also, XLY yielded on average 11.97% more per year over the past decade (18.86% vs. 6.90%). The expense ratio of XLY is 0.34 percentage points lower than PFF’s (0.12% vs. 0.46%).
Fund Composition
Industry Exposure
| XLY | PFF | |
| Technology | 0.57% | 0.0% |
| Industrials | 0.0% | 10.27% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 0.0% |
| Utilities | 0.0% | 81.81% |
| Healthcare | 0.0% | 3.54% |
| Consumer Defensive | 5.34% | 0.0% |
| Real Estate | 0.0% | 0.65% |
| Financial Services | 0.0% | 0.0% |
| Consumer Cyclical | 94.1% | 0.0% |
| Basic Materials | 0.0% | 3.74% |
The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
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%.
XLY is 94.10% more exposed to the Consumer Cyclical sector than PFF (94.1% vs 0.0%). XLY’s exposure to Consumer Defensive and Technology stocks is 5.34% higher and 0.57% higher respectively (5.34% vs. 0.0% and 0.57% vs. 0.0%). In total, Financial Services, Real Estate, and Healthcare also make up 4.19% less of the fund’s holdings compared to PFF (0.00% vs. 4.19%).
Holdings
| XLY Holdings | Weight |
| Amazon.com Inc | 22.9% |
| Tesla Inc | 13.5% |
| The Home Depot Inc | 8.74% |
| McDonald’s Corp | 4.5% |
| Nike Inc B | 4.45% |
| Lowe’s Companies Inc | 3.58% |
| Starbucks Corp | 3.44% |
| Target Corp | 3.12% |
| Booking Holdings Inc | 2.35% |
| TJX Companies Inc | 2.12% |
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
| 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%.
Risk Analysis
| XLY | PFF | |
| Mean Return | 1.47 | 0.52 |
| R-squared | 80.84 | 9.39 |
| Std. Deviation | 15.97 | 7.87 |
| Alpha | 6.96 | 3.45 |
| Beta | 1.02 | 0.81 |
| Sharpe Ratio | 1.06 | 0.72 |
| Treynor Ratio | 16.69 | 6.79 |
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a R-squared of 80.84 with a Alpha of 6.96 and a Treynor Ratio of 16.69. Its Mean Return is 1.47 while XLY’s Beta is 1.02. Furthermore, the fund has a Standard Deviation of 15.97 and a Sharpe Ratio of 1.06.
The iShares Preferred and Income Securities ETF (PFF) has a Alpha of 3.45 with a Treynor Ratio of 6.79 and a Sharpe Ratio of 0.72. Its Standard Deviation is 7.87 while PFF’s Mean Return is 0.52. Furthermore, the fund has a Beta of 0.81 and a R-squared of 9.39.
XLY’s Mean Return is 0.95 points higher than that of PFF and its R-squared is 71.45 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than PFF. The Alpha and Beta of XLY are 3.51 points higher and 0.21 points higher than PFF’s Alpha and Beta.
Performance
Annual Returns
| Year | XLY | PFF |
| 2020 | 29.66% | 7.94% |
| 2019 | 28.43% | 15.62% |
| 2018 | 1.66% | -4.77% |
| 2017 | 22.77% | 8.33% |
| 2016 | 5.87% | 1.26% |
| 2015 | 9.93% | 4.62% |
| 2014 | 9.49% | 13.45% |
| 2013 | 42.74% | -0.59% |
| 2012 | 23.6% | 18.25% |
| 2011 | 5.98% | -2.2% |
| 2010 | 27.36% | 13.96% |
XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% 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
| Fund | Initial Balance | Final Balance | CAGR |
| XLY | $10,000 | $63,066 | 18.86% |
| PFF | $10,000 | $20,272 | 6.90% |
A $10,000 investment in XLY would have resulted in a final balance of $63,066. This is a profit of $53,066 over 11 years and amounts to a compound annual growth rate (CAGR) of 18.86%.
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%.
XLY’s CAGR is 11.97 percentage points higher than that of PFF and as a result, would have yielded $42,794 more on a $10,000 investment. Thus, XLY outperformed PFF by 11.97% annually.
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