In the ongoing search for yield, investors have touched upon preferred stocks, but most preferred stock exchange traded funds are highly exposed to the financial sector. Van Eck’s ETF unit Market Vectors is trying to fill the need, launching a fund that specifically excludes financials.
Market Vectors Preferred Securities ex-Financials ETF (NYSEArca: PFXF) started trading Tuesday.
The ETF will try to reflect the performance of the Wells Fargo Hybrid and Preferred Securities ex Financials Index, which follows the overall performance of publicly traded non-financial preferred securities, such as convertible securities, depository preferred securities and perpetual subordinated debt. PFXF has an expense ratio of 0.40%. [Global X Lists Preferred Stock ETF]
Preferred stocks have a higher claim on assets and earnings than common stocks and dividends are paid to preferred shares before common stocks. However, preferred shareholders do not have voting rights and have a lower potential for capital appreciation. [ETF Chart of the Day: Preferred Shares]
Top holdings include: General Motors Co 12/01/13 maturity 10.1%, PPL Corporateion 7/1/13 maturity 3.7%, Apache Corp 8/1/13 maturity 3.7%, United Technologies 8/1/15 maturity 3.5% and PPL Corporation 5/1/14 maturity 3.2%.