SPFF: New Global X Preferred ETF Is 88% Financials

Seeking Alpha

By Ron Rowland:

Global X SuperIncome Preferred ETF (SPFF - News), launched July 17, is designed to track 50 of the highest yielding North American preferred securities, as defined by the S&P Enhanced Yield North American Preferred Stock Index (SPFF overview).

By screening for the highest yielding preferred securities and paying monthly dividends, SPFF claims to let investors diversify their income streams and potentially raise their portfolio yield. SPFF has an expense ratio of 0.58%, but we could not locate current or historic yield data, volatility, drawdown, or return of the underlying index.

The sector breakdown based on GICS is Financials 88.5% (with Insurance at 8.4% and Real Estate at 6.1%), Energy 4.3%, Industrials 2.7%, Materials 2.4%, and Telecommunications 2.1%.

Analysis/Opinion: I continue to be amazed that fund sponsors tout the supposed yield and income benefits of new products while simultaneously failing to supply any data on those income characteristics. For index-based products, sponsors could at least provide full historical details and characteristics of the underlying index. The absolute minimum should be a prominent link to such data on the index provider’s website.

Although the underlying index of SPFF theoretically includes both U.S. and Canadian preferred stocks, the current country breakdown is 100% U.S. and 0% Canada. The marketing literature does not provide any explanation. High Financials exposure is typical of preferred funds.

Investors should avoid SPFF until the sponsor provides more performance information on the fund or the underlying index. At that time, investors can determine if its 0.58% expense ratio, one of the highest for preferred stock ETFs, is justified.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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