Sector ETFs that have been beneficiaries of investors’ hunger for yield in 2012 such as utilities and junk bonds have stumbled recently on concerns over slowing economic growth, the U.S. fiscal cliff and tax uncertainty. Now investors can add another category to the list: preferred stock ETFs.
The $10.5 billion iShares S&P U.S. Preferred Stock Index Fund (NYSEArca: PFF) is in a three day losing streak and has dropped below its 50-day moving average for the first time in five months. Weakness in high-yield sector ETFs is a sign that investors are moving toward a risk-off stance.
PFF is among the top 10 best-selling ETFs this year with inflows of about $2.8 billion, according to IndexUniverse. [Utilities ETFs Turn Negative for Year on Dividend Tax Worries]
The fund has a 30-day SEC yield of 5.7%, according to manager BlackRock. [High-Yield ETF Falls for Seventh Day]
Through Nov. 14, the preferred stock ETF was up 15.9% year to date, outperforming the 9.9% gain posted by SPDR S&P 500 (NYSEArca: SPY), according to Morningstar. [Preferred Stock ETFs Beating S&P 500 with 6% Yields]
PFF has almost its entire portfolio concentrated in financial institutions in Europe. Data released Thursday showed Europe slipped back into recession in the third quarter.