Principal Spectrum Preferred Securities Active ETF (PREF)

ETF Principal Spectrum Preferred Securities Active ETF Summary

Profile:

The ETF Principal Spectrum Preferred Securities Active ETF (NYSEARCA: PFFD) is an actively managed exchange-traded fund that invests in preferred and income-producing securities. The fund seeks to provide current income and opportunities for capital appreciation. It focuses on a diversified portfolio of securities, including both investment-grade and high-yield issues.

Objective:

PFFD's primary objective is to maximize total return, consisting of capital appreciation and current income. The fund seeks to achieve this through active management and a diversified investment strategy.

Issuer:

Principal Financial Group (PFG) is the issuer of PFFD.

• Reputation & Reliability: PFG enjoys a solid reputation and long-standing track record as a financial institution with over 130 years in the market. It boasts a solid financial position with strong credit ratings.

• Management: The portfolio management team comprises seasoned investment professionals with extensive experience and expertise in managing preferred and income securities.

Market Share:

PFFD is a relatively small ETF in the preferred and income securities space, representing around 1.8% of the total market share. However, it has gained significant traction recently, demonstrating a growth trajectory.

Total Net Assets:

PFFD currently manages over $90 million in total net assets, indicating a growing investor interest.

Moat:

• Active Management: Unlike most preferred ETFs that passively track an index, PFFD employs active management, allowing portfolio managers to select securities with the highest potential for return and income generation.

• Experienced Management Team: PFG's dedicated team of experienced professionals brings expertise and deep market knowledge, enabling them to navigate market complexities and identify opportunities.

• Focus on Niche Market: PFFD focuses on a niche but essential segment of the market, catering specifically to investors seeking preferred and income securities.

Financial Performance:

• Historical Performance: PFFD has delivered consistent positive returns since its inception in 2018, exceeding the benchmark index performance.

• Benchmark Comparison: The fund has outperformed its benchmark index, demonstrating the effectiveness of the active management approach.

Growth Trajectory:

PFFD exhibits a strong and consistent growth trend, reflected in its increasing net assets and positive long-term returns.

Liquidity:

• Average Trading Volume: The average daily trading volume for PFFD is around 20,000 shares, suggesting moderate liquidity.

• Bid-Ask Spread: The bid-ask spread for PFFD is around $0.10, indicating a reasonable transaction cost.

Market Dynamics:

The market environment for preferred securities can be influenced by various factors:

• Interest Rates: Rising interest rates tend to benefit preferred securities as their fixed dividend payments become more attractive relative to other investments.

• Economic Growth: A healthy economy can support the companies issuing preferred securities, leading to higher dividend payouts and capital appreciation potential.

Competitors:

Major competitors in the preferred securities ETF space include PFF, PGX, and FLIC. PFF has the largest market share, followed by PGX.

Expense Ratio:

PFFD has a relatively low expense ratio of 0.75%, which includes management fees, administrative, and operational costs.

Investment Approach and Strategy:

• Strategy: PFFD actively manages its portfolio, selecting preferred and income securities with the highest potential for capital appreciation and income generation rather than tracking a specific benchmark index.

• Composition: The ETF invests in a diversified portfolio of preferred securities from various industries and issuers. This includes both investment-grade and high-yield issues.

Key Points:

• Actively managed preferred securities ETF.
• Aims for capital appreciation and current income.
• Diversified portfolio of preferred and income-generating securities.
• Outperformed benchmark index.
• Growing net assets.
• Experienced management team.
• Relatively low expense ratio.

Risks:

• Volatility: As with all securities, PFFD's price can fluctuate, and investors should prepare for potential market swings.

• Credit Risk: Preferred securities are generally less senior than other securities, making them susceptible to credit risk, especially those with lower investment-grade ratings.

• Interest Rate Risk: Rising interest rates could decrease the value of preferred securities, especially those with longer maturities.

• Market Risk: PFFD's performance depends on the overall performance of the underlying securities and market factors, which can lead to investment losses.

Who Should Consider Investing:

PFFD could be suitable for:

• Income-seeking investors: The fund offers the potential for regular income generation through preferred stock dividends.

• Investors with a longer investment horizon: The fund's focus on long-term capital appreciation and income generation may appeal to investors looking beyond short-term fluctuations.

• Those seeking diversification: PFFD offers diversification across various industry sectors and issuer types within the preferred securities market.

Fundamental Rating Based on AI (1-10): 8.5

PFFD receives a strong rating of 8.5 based on a comprehensive AI analysis. This accounts for the ETF's positive financial performance, active management approach, experienced team, growing net assets, and niche market focus, suggesting a promising investment opportunity. However, investors must be cognizant of the associated risks, especially market volatility, interest rate fluctuations, and credit risks, before making investment decisions.

Disclaimer:

The provided information is for educational purposes and should not be construed as financial advice. All investment decisions should be made after thorough research and consideration.

Sources:

• Principal Financial Group website: https://individual.principal.com/insights/investing-with-principal/etf-principal-spectrum-preferred-securities-active-etf
• ETF.com PFFD ETF Profile: https://www.etf.com/etf-type-explorer/preferred-stock-etfs/
• Morningstar PFFD Fund Report: https://www.morningstar.com/etfs/ark/pffd/performance