The Power of Preferreds

Preferred Stock ETFs have mostly traded sideways in the past couple months, with the largest fund in the category iShares S&P U.S. Preferred Stock (PFF) 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 PowerShares Preferred Portfolio (PGX) which now has amassed $2.08 billion in assets under management.

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.

Source:  Paul Weisbruch, Street One Financial

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iShares S&P 500 US Preferred Stock Index Fund (PFF) and the PowerShares Preferred Portfolio (PGX) are components of the D2 Capital Management Multi-Asset Income Portfolio.  The funds are currently yielding 5.33% and 6.66% (as of 6 December 2013).

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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