PFXF ETF

VanEck Preferred Securities ex Financials ETF primarily invests in preferred securities with high yields, avoiding financial stocks. The ETF has $1.69 billion in assets, low expense ratio of 0.41%, and 30-day SEC yield of 6.76%. Exclusion of financial stocks could lead to potential capital gains and high yields over the next few years.

Partly driven by anticipation of a potential interest rate cut from the Federal Reserve this year, preferred stocks and related ETFs are performing well for income investors. The VanEck Preferred Securities ex Financials ETF (PFXF) has gained almost 4% since the beginning of the year.

By Coulter Regal, CFA Product Manager Preferred securities are trading at attractive discounts, however, just as many are looking to manage their Mag 7 exposure, we believe the same risk management applies to preferreds as well.

VanEck Preferred Securities ex Financials ETF returns have lagged riskier common stock alternatives over the past year. 61.74% of ETF assets are allocated to sectors such as REITs, Utilities, and Telecoms that traditionally employ significant amounts of debt. The indebted preferred issuers in PFXF's portfolio will benefit from lower interest rates by the Federal Reserve.

PFXF offers a diverse fund of preferred shares across many industries. Over the last decade, its dividend has been stagnant or declined, and total returns are negative. The preferred equity in its holdings will continue to create disappointment for long-term holders.

The recent surge by Treasury yields is matriculating throughout the fixed income universe. It stokes higher yields on a slew of bond segments, including preferred stocks.

VanEck Preferred Securities ex Financials ETF offers diversified exposure to preferred securities outside of the financial sector. Preferred securities provide higher dividends, reduced risk, and potential for fixed income. The fund is heavily weighted in REITs, which may explain its underperformance compared to other preferred stock ETFs.

By Coulter Regal, CFA, Associate Product Manager This blog answers commonly asked questions about the PFXF ETF and explores why Preferred Securities are becoming a preferred alternative income source among investors. Many investors have expanded their search for income to opportunities beyond traditional debt.

Most preferred shares ETFs are significantly overweight financials. Losses are high when a crisis hits the industry. To remedy the above, an investment in PFXF could help.