Preferred Stock ETFs Continue Their Winning Ways
Wednesday, March 24th, 2010Michael Johnston submits:
Recent growth in the ETF industry has been due in large part to surges in popularity of asset classes to which many investors would otherwise have fairly limited access. Exchange-traded commodity products have seen billions of dollars in cash inflows, as have fixed income and currency funds. While the number of ETFs offering exposure to preferred stock can still be counted on one hand, this corner of the ETF industry has witnessed tremendous growth as well, as investors have embraced ETFs as a way to gain exposure to this “hybrid” asset class.
At the end of February, the four preferred stock ETFs available to U.S. investors had aggregate assets of about $6.2 billion, up from just $1.7 billion a year ago (when there were only three funds available). While stellar returns have given asset levels a boost, so too have waves of cash inflows into these funds. With interest rates at record lows (and expected to remain there) many traditional fixed income investments are offering minimal yields, leading investors to look elsewhere for current returns. While some have turned to junk bonds and closed-end funds, others have found attractive yields from preferred stock.
