BlackRock’s iShares Exchange Traded Funds business has launched the iShares S&P International Preferred Stock Index Fund (nyse arca:IPFF) on the NYSE Arca. The fund is the first ETF that offers access to local currency, preferred securities that are offered in developed markets outside the US.
The new ETF joins its US focused counterpart, the iShares S&P US Preferred Stock Index Fund (nyse arca:PFF), which had USD7.2 Billion in Assets Under Management (AUM)(1).
International preferred securities — income generating securities that are senior to common stock but subordinate to fixed income — can be a compelling investment alternative for investors who are seeking to diversify outside of the US and away from the US dollar.
"Income-seeking investors are starved for yield opportunities, but traditional income sources today are offering historically low yields," says Darek Wojnar, Head of iShares Product Development at BlackRock. "At the same time, it’s been challenging for investors to easily tap into potentially attractive income sources beyond their home markets. "Our international preferred stock ETF is designed to uniquely address this need, giving investors ready access to a diversified basket of preferred securities in tandem with the benefits of non-US country and currency exposures.”
The iShares S&P International Preferred Stock ETF provides investors an opportunity to participate in several of today’s most attractive country markets, as part of its access to the non-US preferred securities category. The fund is benchmarked to the S&P International Preferred Stock Index, a market-cap weighted, quarterly rebalanced index. The top country weights are Canada followed by the UK and New Zealand.
"Canada, in particular, is drawing increasing investor notice as one of a group of relatively smaller, developed countries that are less burdened by debt and structural deficits, and that also enjoy better growth prospects than the larger developed nations," Wojnar says. "The new iShares International Preferred Stock ETF is a highly flexible approach for adding exposure to such markets with an associated diversification benefit."
The index has a heavy tilt towards financials, a common trait among preferred securities. The largest country and sector representation is Canadian Financials at 59% of market capitalisation.