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Principal launches ETF to help US taxpayers boost after-tax income


Principal Global Investors has launched the Principal Spectrum Tax-Advantaged Dividend Active ETF (PQDI), which it says is the first fund specifically designed to offer investors access to qualified dividend income by investing in securities from all three sectors of the global US dollar capital securities market. PQDI is designed to help US taxpayers boost after-tax income by targeting exposure to qualified dividends.

In changing market environments, preferred and capital securities have historically delivered attractive risk-adjusted returns, and active management can potentially enhance returns by selecting higher-quality and improving credits and avoiding speculative risks. Investors are seeking new innovative solutions to boost after-tax income, especially as interest rates remain low. PQDI exposure to preferred securities aims to provide tax-advantaged income as US investors build and distribute wealth.

“This ‘first mover’ active ETF represents an improved alternative to the roughly USD25 billion passive preferred securities ETF market, concentrated in USD25 par preferreds, and aims to provide tax-advantaged income to US taxpayers,” says Kamal Bhatia, President and CEO, Principal Funds. “We know our advisory clients are craving long term opportunities that generate tax efficient spread income with substantial value from actively managing in a permanently altered financial environment. We built this strategy simply with their voices behind it.”

Investors are increasingly looking to ETFs for active and fixed income products. PQDI is managed by Spectrum Asset Management, a leading preferred and capital securities investment team within Principal. PQDI is the second ETF managed by Spectrum, in addition to the Principal Spectrum Preferred Securities Active ETF (PREF), which launched in 2017.

PQDI has the objective of providing income and will invest in a diversified portfolio of USD denominated securities from all major sectors of the global US dollar preferred and capital securities market1. PQDI will focus on income from dividends eligible for beneficial tax treatment, but the fund also invests in securities that are not eligible for such treatment. In particular, PQDI will seek securities that, at the time of issuance, are eligible to pay dividends that qualify for reduced US federal income tax rates for “qualified dividend income” (QDI) or for the deduction of up to 20 per cent of qualified real estate investment trust (REIT) dividends (QRD).

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