PFF vs PREF

PFFAiShares Preferred and Income Securities ETF

PREFBPrincipal Spectrum Preferred Securities Active ETF

In short

PFF Preferred stock is a clumsy market to shop one issue at a time. PFF, running since 2007, bundles roughly 500 US dollar preferreds and hybrids into a single heavily traded ticker and pays out monthly.

PREF Most preferred ETFs shop the $25-par retail aisle. PREF goes where the institutions trade: $1,000-par preferreds, hand-picked by an active team since 2017, with income paid out monthly.

Stated mandate

PFF The fund seeks to track an index of U.S. dollar-denominated preferred and hybrid securities, providing exposure to preferred stock and subordinated debt with an income-oriented mandate.

PREF The fund is actively managed and does not seek to track a specified index.

Why people hold it

• PFF One ticker buys roughly 500 US dollar preferreds and hybrids tracking the ICE Exchange-Listed Preferred & Hybrid Securities Index, a corner most investors can't assemble issue by issue.
• Distributions land monthly rather than quarterly, a steadier rhythm for anyone spending the income.
• A multi-billion-dollar fund that trades actively, so getting in and out is rarely the hard part.
• Live since 2007, through the financial crisis and several rate cycles, with the same income-oriented mandate from a large index shop.

• PREF Targets $1,000 par preferreds, the institutional-lot corner most preferred funds skip, with a mandate built around current income rather than index replication.principalam.com
• No benchmark to hug. Managers hold roughly 160 positions in preferred stock and junior subordinated debt from US and non-US issuers, and can shift as the market shifts.principalam.com
• Income lands monthly, not quarterly.
• Trading since 2017 and now a multi-billion-dollar fund: a seasoned strategy with a real book of assets behind it, not a launch-week experiment.

Worth knowing

• PFF 0.45% a year is the going rate in this niche (the peer median), but it's many times what broad stock index trackers like VT charge.
• Preferreds and subordinated debt are hybrids: they rank below an issuer's senior bonds, so this trades on credit and rate conditions more than on earnings growth.
• The mandate is US dollar issuers only, so there's no international preferred exposure here.

• PREF Active pricing: 0.55% a year against a 0.44% peer-group median, and broad financials index funds like VFH and XLF charge under a tenth of a percent for a very different job.
• There is no index to check the work against, so outcomes ride on the team's security selection.
• Preferreds rank below bonds in the capital stack and the issuers skew financial, so stress in banks and insurers shows up here.principalam.com

Full PFF profile⁠

Full PREF profile⁠