ETF Chart of the Day: The Power of Preferreds

Preferred Stock ETFs have mostly traded sideways in the past couple months, with the largest fund in the category PFF (iShares S&P U.S. Preferred Stock, Expense Ratio 0.48%) losing a hefty amount of overall
assets year to date via redemption flows ($-1.4 billion).

This does not take away from the fact that the ETF is still the largest in its niche in terms of overall assets under management, with $8.86 billion currently. Several other Preferred Stock based ETFs have grown impressively in recent years as well, specifically PGX (PowerShares Preferred Portfolio, Expense Ratio 0.50%) and PGF (PowerShares Financial Preferred Portfolio, Expense Ratio 0.60%) which now have amassed $2.08 billion and $1.48 billion in assets under management respectively.

Yield thirsty investment managers have increasingly looked to Preferred Stocks individually as well as in the form of ETFs, and the space has demonstrated the ability to raise and retain assets, attracting newer entrants from other issuers.

Preferred stocks are often used by portfolio managers to provide an additional level of diversity in portfolios, and potentially in place of or in conjunction with bond exposure at times. For instance, six other funds fall in the greater “Preferred” Stock category, with strategies that venture outside of U.S. domestic equity like IPFF (iShares International Preferred Stock, Expense Ratio 0.55%) and CNPF (Global X Canada Preferred, Expense Ratio 0.58%), or methodologies that simply take different index approaches in their pursuit of income via preferred stock holdings.

Other names that stand out here are PSK (SPDR Wells Fargo Preferred Stock, Expense Ratio 0.45%), PFXF (Market Vectors Preferred Securities ex- Financials, Expense Ratio 0.40%), SPFF (Global X SuperIncome Preferred, Expense Ratio 0.58%), and FPE (First Trust Preferred Securities and Income, Expense Ratio 0.85%).