Upstart exchange traded funds issuer Elkhorn Investments could add a preferred stocks ETF later this month. The Elkhorn S&P High Quality Preferred ETF, which would be Illinois-based Elkhorn’s third ETF, could debut before the end of May.
The new ETF will trade under the ticker EPRF and track the S&P U.S. High Quality Preferred Index. That index is comprised of Investment Grade, Cumulative Preferred Securities (BBB or higher). The index is designed to serve as an investable benchmark that represents the high-quality U.S. preferred stock market using quality characteristics pertaining to type of issuance, payment, and rating.
Preferred stocks are a type of hybrid security that show bond- and equity-esque characteristics. The shares are issued by financial institutions, utilities and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds. Additionally, preferred stocks issue dividends on a regular basis, but investors are unlikely to enjoy capital appreciation on par with common shares.