First Trust Files Plan for Active Preferred ETF
First Trust, the eleventh-largest U.S. ETF issuer, has filed plans with the Securities and Exchange Commission (SEC) to possibly list an actively managed preferred stock ETF. No ticker or expense ratio was disclosed in the filing.
Under normal market conditions, the new First Trust ETF would invest at least 80% of its net assets in preferred stocks and similar securities and the fund may invest up 15% of its net assets in cash and cash equivalents, according to the filing.
The new ETF will invest in only investment grade securities. Preferred securities generally pay fixed or adjustable-rate distributions to investors and have preference over common stock in the payment of distributions and the liquidation of a company's assets, but are generally junior to all forms of the company's debt, including both senior and subordinated debt, according to the filing.
First Trust preferred ETF will face competition in the form of the well-established PowerShares Financial Preferred Portfolio (NYSE: PGF), the iShares Preferred Stock Index Fund (NYSE: PFF), the PowerShares Preferred Portfolio (NYSE: PGX) and the newly minted Global X Canada Preferred ETF (NYSE: CNPF), just to name a few.
Illinois-based First Trust had 60 ETFs with $5.9 billion in assets under management at the end of August, according to data from the National Stock Exchange.
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