PFF vs PRFD

PFFAiShares Preferred and Income Securities ETF

PRFDCPIMCO Preferred And Capital Securities Active Exchange-Traded Fund

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.

PRFD PIMCO points its credit desk at preferreds, including the regulatory-capital paper banks issue to institutions rather than only retail-listed shares. Active, monthly-paying, running since 2023.

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.

PRFD The Fund seeks total return with a secondary objective of income generation. It normally invests at least 80% of its assets in diversified preferred and capital securities, including regulatory-capital instruments issued by U.S. and non-U.S. financial institutions.

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.

• PRFD At least 80% of assets go to preferred and capital securities, including regulatory-capital instruments from US and non-US financial institutions. Wider ground than US-listed preferreds alone.
• Actively run rather than index-tracking: managers choose the issues, chasing total return with income as the stated secondary objective.
• Pays monthly and spreads exposure across a couple hundred positions instead of a short list of jumbo bank issues.
• Standard 1940 Act fund wrapper, so shareholders get 1099 tax reporting rather than a partnership K-1.

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.

• PRFD Active management costs: the 0.88% expense ratio sits above index rivals in the same aisle, such as EVPF at 0.20% and PSK at 0.45%.
• Trades lightly next to the category's household names, so bid-ask spreads can be wider, particularly in stressed markets.
• The fund discloses that distributions may include return of capital, meaning part of a monthly payout can be capital returned rather than income earned.

Full PFF profile⁠

Full PRFD profile⁠