preferred ETFs – PFFD & PFFV

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  • #12635 Reply

    Hi, I’m new to the site and couldn’t find any prior discussion on preferred ETFs. I’m looking at PFFD and PFFV from Global X. I’m wondering if anyone has experience or ideas on them. They both seem reasonably priced while PFFV is much newer and smaller. My specific question is whether you’d expect in practice that PFFV as the variable rate etf would offer meaningfully better performance in a rising rate environment. Thanks in advance for any ideas and apologies if this is posted in the wrong spot.

    #12705 Reply

    Hey Stewey… I’ll give you my thoughts.  I started with PFF before I found this site.  After observing and learning here for about 6 months, I was convinced I could do better on my own and then spent the next couple of months learning as much as I could.  The expense ratio of PFFV is low, which is great.  As to whether it protects better in rising rates, I think the answer is yes, but maybe not as much as you think.  The variable rate feature would be a positive in that environment, but if you look at the Top 10 holdings, almost all are trading well above $25, and they’re all issued by financial institutions.  Rising rates should help financial stocks, but I’d prefer more diversification… so the pairing with PFFD does help.   My guess, and this is only a guess, is that performance would be similar between the two issues unless the move in interest rates is significant.  PFFV has slightly outperformed PFFD since the election as I suspect that people began to fear higher rates (not political).  However, when the 10yr actually did start to move quickly (January 4th) the performance of the two funds is nearly identical.  Just my perspective.

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