When it rains, it pours.
Hours after publishing my piece on a new preferred-stock fund by Global X, Market Vectors made its own salvo, announcing the launch of the Market Vectors Preferred Securities ex Financials ETF (NYSE:PFXF).
Unlike the rest of the preferred-stock fund field, PFXF only deals in the preferred stock of non-financials. Its base index, the Wells Fargo Hybrid and Preferred Securities ex Financials Index, instead tracks securities of REITs, electric companies, auto manufacturers and telecom firms. Preferred shares of General Motors (NYSE:GM) are weighted at more than 10%, with two PPL Corp. (NYSE:PPL) series, as well as United Technologies (NYSE:UTX) and Apache (NYSE:APA) preferreds rounding out the top five holdings.
Market Vectors Product Manager Brandon Rakszawski says, “In developing PFXF, we wanted to offer access to the income potential of preferred securities but limit potential volatility by excluding financials, which has been the most volatile sector in recent years.” And considering many investors’ resulting aversion to financials, he seems spot on.
Still, just because you’re out of financials doesn’t mean you’re out of the woods. Four years ago, real estate investment trust Maguire Properties — now MPG Office Trust (NYSE:MPG) — suspended its Series A preferreds, and further back, Unisys (NYSE:UIS) did the same. It’s not common, but it can happen.
You also can check out my review of SPFF for a primer on some of the other pros and cons of preferred stocks.
PFXF boasts the lowest net expense ratio at time of launch at 0.4%, helped by a cap that will last through Sept. 1, 2013.