A New High-Yield ETF That Focuses on REIT Preferreds

Infrastructure Capital Advisors has partnered with Virtus ETF Solutions to launch the first exchange traded fund that specifically targets high yielding liquid preferred securities issued by real estate investment trusts.

On Wednesday, Infrastructure Capital Advisors rolled out the InfraCap REIT Preferred ETF (NYSEArca: PFFR). PFFR has a 0.45% expense ratio.

“PFFR is one of the newest products to overlap the newly added 11th sector in the S&P 500 and allows investors to invest in the real estate industry without having to select individual companies,” Jay D. Hatfield, Co-founder and President of InfraCap, said in a note. “We also believe it will be extremely attractive to investor’s looking for income in a yield-stretched market.”

The new ETF will try to reflect the performance of the Indxx REIT Preferred Stock Index, which is comprised of preferred securities listed on U.S. exchanges that are issued by REITs.

Preferred stocks are a type of hybrid security that show bond- and equity-like 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. While preferred securities represent ownership interest in a company, preferred stockholders usually have no voting rites with respect to corporate matters of the issuer, but preferred securities have rights and characteristics similar to debt instruments. Additionally, preferred stocks issue dividends on a regular basis, but investors don’t usually enjoy capital appreciation on par with common shares.