BlackRock Asset Management Canada has launched the iShares S&P/TSX North American Preferred Stock Index Fund on the Toronto Stock Exchange.
The fund will provide investors with geographically diversified exposure to preferred shares by investing a portion of its assets in US preferred shares and a portion in Canadian preferred shares.
Preferred stock is an asset class that combines some characteristics of both equity and debt securities and generally makes regular payments to investors.
The fund will hedge its currency exposure to the US dollar, and carry a management fee of 0.45 per cent per year.
“Preferred stock generally has higher yields than common stock, the bond market and the money market, but is less risky than equity, making XPF a useful asset for boosting income in a risk-controlled fashion,” says Oliver McMahon, director of product management for iShares ETFs at BlackRock Canada.
The S&P/TSX North American Preferred Stock Canadian Dollar Hedged Index, which is the underlying index for the fund, currently includes 226 US securities and 119 Canadian securities for a total of 345 securities.
Combining the two markets allows investors to take advantage of the breadth of the US preferred share market, which also currently yields significantly more than the Canadian market, while maintaining the benefits of Canadian preferred stock exposure.