Global X Rolls Out ‘SuperIncome’ Preferred ETF

By
July 17, 2012
Share:

Global X, the New York-based exchange-traded fund firm known for its niche fund strategies and focus on emerging markets, today rolled out an ETF focused on preferred securities, the latest sign of the ETF industry’s focus on bringing to market income-targeting investment themes.

The Global X SuperIncome Preferred ETF (NYSEArca: SPFF) will track the S&P High Yield Preferred Stock Index, and focus on U.S.-listed preferred stocks, which pay a set dividend and take precedence over common stocks in the event of a company’s liquidation.

SPFF is the latest ETF to target preferred securities. In fact, Van Eck today is rolling out a preferred ETF that screens out financial companies from the fund. Such funds have become quite popular at a time of increased market volatility and when interest rates are at near all-time lows.

Funds like the iShares S&P U.S. Preferred Stock Index Fund (NYSEArca: PFF)—one of the market’s largest preferred stock ETF, with $9.3 billion in assets—and the $1.8 billion PowerShares Preferred Portfolio (NYSEArca: PGX) speak to that investor demand.

Preferred stock ETFs are essentially fixed-income strategies because of the securities’ hybrid nature: They behave both as equity and as debt. Their appeal is that preferred stocks are known for their reliable, steady dividend payments. What’s more, they take precedence over common stocks in a company’s capital structure, and they usually serve up higher income potential than common stocks.

The new Global X fund’s index tracks the underlying performance of the highest-yielding preferred securities in the U.S., and had 50 constituents as of March 31. The index uses a representative sampling strategy, meaning the fund typically doesn’t hold all the securities of the index, according to a recent prospectus Global X filed detailing the fund.

The index can include different categories of preferred stock, such as floating and fixed-rate preferreds, perpetual preferred stock, trust preferred securities, cumulative and noncumulative preferreds or preferred stocks with a callable or conversion feature.

The fund will come with an annual expense ratio of 0.58 percent, the prospectus said. That’s pricier than PFF and PGX, which have expense ratios of 0.48 percent and 0.50 percent, respectively.

It’s also more expensive than a fund Van Eck is bringing to market today. The Market Vectors Preferred Securities ex Financials ETF (NYSEArca: PFXF), which will steer clear of preferred securities issued by companies in the financial sector, comes in at 0.40 percent, according to a prospectus Van Eck filed detailing the fund.

ETF.COM CHANNELS

Trying to figure out alternatives ETFs? Use our alternatives ETFs channel, library and ETF screener!

Want to learn more about smart-beta ETFs? Check out our smart-beta guide, essentials library and ETF screener!

ETF DAILY DATA

'VWO' topped redemptions Tuesday, Sept. 1, as investors continued to trim exposure to international stock ETFs, particularly emerging market funds.

'SPY' and 'MDY' paced State Street's issuer-leading asset gains Tuesday, Sept. 1. Total U.S.-listed ETF assets slipped below $2 trillion.

ETF.COM ANALYST BLOGS

By Dave Nadig

With many ETFs currently trading well off fair value, what’s an ETF investor to do? Don’t panic.

By Matt Hougan

Out-of-favor funds can bring attractive returns.

By Matt Hougan

New data from Charles Schwab show that the death of mutual funds is happening faster than we thought.

By Dave Nadig

Grab the popcorn. Precidian just doubled-down on its nontransparent active ETF proposal with the SEC this morning.

ETF INDUSTRY PERSPECTIVE

By John Del Vecchio

An index that goes long financially sound companies and shorts the ones with problematic balance sheets.

By Dan Draper

The nature of retirement is changing. How can investors adapt?

By Invesco PowerShares

A more in-depth look at the smart-beta survey's results.