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State Street launches preferred stock ETF

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State Street Global Advisors has launched the SPDR Wells Fargo Preferred Stock ETF on NYSE Arca.

Its annual expense ratio is 0.45 per cent.

The fund seeks to track the performance of the Wells Fargo Hybrid and Preferred Securities Aggregate Index. The index includes non-convertible preferred securities listed on the NYSE or NYSE Arca that have a par amount of USD25; are rated investment grade by Moody’s Investors Service or Standard & Poor’s Ratings Services; and have a minimum monthly trading volume during each of the last six months of at least 250,000 trading units. As of 31 July 2009, the index provides exposure to more than 160 securities.

Preferred stock is an asset class that shares some similarities with both common stock and bonds. Preferred stock represents partial ownership in a company, however, shareholders usually do not have voting rights, and similar to bonds, the primary source of return is usually generated by a fixed payment – a dividend that must be paid out before dividends to common stockholders.

“The SPDR Wells Fargo Preferred Stock ETF provides financial advisors and investors with improved access to the benefits of this unique asset class, which include high yields and a low correlation to both bonds and common stock,” says Anthony Rochte, senior managing director at State Street Global Advisors. “Developed in response to investor demand, the SPDR Wells Fargo Preferred Stock ETF is based on an index that offers a level of diversification that is unmatched by other benchmarks in this asset class.”

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