Here’s the jist of how the new fund will operate, according to its SEC filing:
Under normal market conditions, the Fund will invest not less than 80% of its assets in preferred securities listed on U.S. exchanges. Preferred securities are a class of equity security that typically pay fixed or floating dividends to investors and have “preference” over common stock (but are subordinated to bonds), in that the company issuing the preferred and common stock must pay dividends to preferred stockholders before common stockholders, and, in the event of a bankruptcy or liquidation of the company’s assets, must put the claims of the preferred stockholders ahead of the claims of the common stockholders. The Fund’s portfolio will primarily consist of preferred securities issued by companies with market capitalizations of over $100 million, which may include small and mid-capitalization companies.
PFFA will trade on the NYSE Arca stock exchange, and is a pretty unique offering in that it’s actively managed. Most preferred stock ETFs out there these days simply track an index of preferred shares. There’s no word yet on what kind of expense ratio the new fund will have, but actively managed funds tend to be more expensive than their passive counterparts.
Virtus currently counts seven ETFs in total, so PFFA will be the eighth to hit the market.
Its largest fund, the$183 million Virtus Newfleet Multi-Sector Unconstrained Bond ETF (NYSE:NFLT), was trading at $25.76 per share on Thursday morning, up $0.03 (+0.12%). Year-to-date, NFLT has gained 4.11%, versus a 11.89% rise in the benchmark S&P 500 index during the same period.