New iShares International Preferred ETF Is Mostly Canadian

December 2, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs)

BlackRock introduced what is essentially a Canadian financials preferred stock fund on November 17 with a name of iShares S&P International Preferred Stock Fund (IPFF).  The new ETF has an 85% allocation to the financial sector and a 73% allocation to Canada.  I’m not implying these allocations are a bad thing, just that potential investors need to be aware of what they are buying.

The underlying index “measures the performance of a select group of preferred stocks from non-U.S. developed market issuers and traded in non-U.S. developed market venues.”  BlackRock does not provide much information on what it takes to be a member of this “select group” and even less information about yield, performance, or history of the index.  Most of the data fields on the index tab of the overview page are blank.

The fund has an expense ratio of 0.55% and holds 69 preferred stocks.  The largest of these holdings are Swedbank AB-Prf with a 4.6% weighting, Kiwi Capital Securities 4.0%, Quayside Holdings Perp Prf 3.8%, TransCanada Corp TRP 2.8%, and Manulife Financial Corp 2.3%.

As is typical with preferred stock funds, the sector allocations are heavily skewed toward Financials at 84.4%.  Other sectors include Energy 7.6%, Utilities 3.0%, and all others adding up to just 5.0%.  Country weightings are also lopsided with Canada at 73.4%, U.K. 10.4%, New Zealand 7.8%, Sweden 5.4%, Guernsey 1.4%, Singapore 1.3%, and U.S. 0.1%, while all other developed countries have zero representation.

Investors are typically interested in preferred shares for their yield.  Although we have no clue as to the yield for the fund or its underlying index, we are informed the new ETF intends to make monthly dividend payments.

Primary competition will come from Global X Canada Preferred ETF (CNPF) with a yield of about 4.1% and a 0.58% expense ratio.  Domestic preferred stock ETF offerings include iShares U.S. Preferred Stock (PFF), PowerShares Preferred Portfolio (PGX), SPDR Wells Fargo Preferred Stock ETF (PSK), and PowerShares Financial Preferred Portfolio (PGF). 

Additional information about IPFF can be found in the fact sheet (pdf) and prospectus (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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