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Market Vectors launches Preferred Securities ex Financials ETF

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Market Vectors ETF Trust has launched Market Vectors Preferred Securities ex Financials ETF, which is designed to offer investors access to the income potential of preferred securities without the volatility of financials.



 

Among preferred securities-focused ETFs listed in the US, PFXF has the lowest published net expense ratio at the time of launch.

PFXF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Wells Fargo Hybrid and Preferred Securities ex Financials Index, a rules-based index intended to track the overall performance of publicly traded non-financial preferred securities, including securities that, in Wells Fargo Securities’ judgment, are functionally equivalent to preferred securities such as convertible securities, depository preferred securities and perpetual subordinated debt.

Top industries in the index as of 30 June 2012 included Reits, electric, auto manufacturers and telecommunications. The index excludes financials, such as broker-dealers, banks, futures commission merchants, investment advisers and insurance companies.

“In developing PFXF, we wanted to offer access to the income potential of preferred securities but limit potential volatility by excluding financials, which has been the most volatile sector in recent years,” says Brandon Rakszawski, product manager with Market Vectors. “We’re please to be able to offer this unique take on the preferred securities market while also launching PFXF with the lowest published net expense ratio of the preferred securities-focused ETFs currently listed in the US.”

Rakszawski noted that investing in preferred securities is not without risks, including the possibility that such securities may lose substantial value if distributions are deferred, suspended or not declared, the possibility of declining prices when interest rates rise, and the fact that preferred securities may be subordinate to traditional fixed income securities. Additionally, the fund’s holdings may be subject to call risk, concentration risk, and risks associated with investing in the real estate sector, among others.

“PFXF is the latest in a series of income-oriented ETFs we have brought to market over the past year,” said Jan van Eck, President of Market Vectors ETF Trust. “In the process of expanding our lineup, we have offered exposure to several underrepresented areas of the market underscoring our commitment to yield-focused investors.”

PFXF is the 50th ETF in the Market Vectors family. It has a gross expense ratio of 0.52 per cent and a net expense ratio of 0.40 per cent, which is capped at least until 1 September 2013. Cap excludes certain expenses, such as interest.

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