Principal Spectrum Preferred Securities Active ETF

PREF

Market cap $1.3B

The Principal Spectrum Preferred Securities Active ETF has a low-risk profile among preferred ETFs based on credit risk, historical volatility and maximum drawdown. PREF is heavily concentrated in financials, especially banks, introducing potential systemic risk despite moderate issuer concentration. While PREF's total return since inception outpaces inflation and investment-grade bonds, both share price and distributions have declined in real terms.

Principal Spectrum Preferred Securities Active ETF is an income-oriented ETF focusing on preferred securities, primarily from financial companies. The total return of PREF keeps pace with inflation, but long-term shareholders have seen both their capital and income going down. PREF has lower volatility compared to peers but lags in yield, total return, and risk-adjusted performance, making VRP and PFXF more attractive.

PREF is an actively managed ETF investing at least 80% in preferred securities, primarily from financial institutions, with 91% of assets rated BBB. The fund is heavily concentrated in the financial sector, with 55% exposure to banks and 16% to insurance, posing risks during banking crises. PREF has not consistently outperformed its passive peer, PFF, despite active management, raising questions about its value proposition.

We take a look at the action in preferreds and baby bonds through the second week of April and highlight some of the key themes we are watching.

We take a look at the action in preferreds and baby bonds through the fourth week of March and highlight some of the key themes we are watching. Preferreds had a good week as Treasury yields fell on the back of the Fed's more dovish than expected stance. We take a look at how stocks with different spreads over SOFR could react to Fed's cuts.

We take a look at the action in preferreds and baby bonds through the third week of March and highlight some of the key themes we are watching. Preferreds were down for the week due to rising Treasury yields, but most preferred CEF sectors remain positive for the month. Albemarle issued a new preferred stock with a mandatory convertible feature, offering upside participation with less downside than the common and a higher coupon.

We take a look at the action in preferreds and baby bonds through the fourth week of February and highlight some of the key themes we are watching. Preferreds had a strong week with a 1%+ return, driven by a drop in Treasury yields and compression in credit spreads. Different preferreds sectors have different drawdown profiles, offering investors an opportunity to tilt to more resilient securities in anticipation of the next drawdown.

PFFA is a well-diversified and consistently top-performing preferred stock ETF, enabled by management's bold allocation strategy.

We take a look at the action in preferreds and baby bonds through the second week of February and highlight some of the key themes we are watching. Preferreds were flat on the week as higher Treasury yields were offset by tighter credit spreads. A high yield-to-call is not a sufficient reason to buy a given preferred.

We take a look at the action in preferreds and baby bonds through the fourth week of January and highlight some of the key themes we are watching. Preferred stock and baby bond market had a good week with most sectors finishing in the green. The article discusses the curious case of Aspen insurer preferred AHL.PR.C and how the coupon conversion worked on the first call date.