iShares hasn’t launched any new ETFs since rolling out its short-term TIPS fund (STIP) in early December, but the issuer responsible for close to 45% of all U.S. ETF assets continues to expand its product pipeline. The San Francisco-based ETF giant recently detailed plans for a international preferred stock ETF in an SEC filing; the proposed S&P International Preferred Stock Index Fund would seek to replicate the S&P International Preferred Stock Index.
That index consists of preferred stocks from non-U.S. developed market issuers and traded in non-U.S. developed markets, with a heavy tilt towards securities of Canadian banks. As of January 24, 2011, Canadian issues accounted for about 73% of the underlying index, while financial companies made up more than 80% of the index. Also represented in the S&P International Preferred Stock Index are Japan, New Zealand, and the United Kingdom.
iShares currently offers the S&P U.S. Preferred Stock Index Fund (PFF), which has more than $6 billion in assets. PowerShares offers two preferred stock ETFs (PGF and PGX) with aggregate assets of about $3 billion, while State Street’s PSK has about $100 million [see ETF Roundup: One Trillion And Counting].
Preferred stock entitles the holder to an ownership interest in a company, but the securities generally do not come with voting rights and exhibit many characteristics common among bonds. Preferred stocks generally are issued with a fixed par value and pay dividends based on a percentage of that par value at a fixed or variable rate. Additionally, preferred stocks often have a liquidation value that equals the original purchase price of the preferred stock at the date of issuance [see Preferred Stock ETFs Head-To-Head].
While ETFs have become increasingly popular vehicles for achieving fixed income exposure, the majority of products currently on the market focus exclusively on U.S. securities. According to the ETF screener there are more than 135 bond ETFs available to U.S. investors; just four are in the Emerging Markets Bonds ETFdb Category and four in the International Government Bonds category. PowerShares (PICB) and State Street (IBND) both offer ETFs that invest in international corporate bonds as well.
No information on the ticker symbol or expense ratio was included in the filing [see The Definitive Guide To Preferred Stock ETF Investing].
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Disclosure: No positions at time of writing, photo is courtesy of Pedro Szekely.