Invesco Preferred Shares UCITS ETF

Issuer: Invesco

Asset Class: Equity

TER: 50bps

Trading Currency: USD

Pays Income: False

Listing Date: 03 Oct 2017

Ticker: PRFD

ISIN: IE00BDVJF675

This fund offers exposure to the preferred securities market, which consists of hybrid instruments that blend characteristics of both stocks and bonds. Preferred shares sit above common stock but below bonds in a company's capital structure, meaning their holders have priority over common stockholders for dividend payments and asset distribution in a liquidation scenario. They typically offer fixed, high-yield dividend payments, making them an attractive option for investors seeking a steady income stream that is potentially higher than what is offered by traditional corporate or government bonds of the same issuer.

The investment provides diversified access to a portfolio of US dollar-denominated fixed-rate preferred securities from various sectors, primarily financials, utilities, and communication services. By physically tracking the performance of a benchmark index, the fund offers a transparent, rules-based approach to investing in this niche asset class. This strategy helps to mitigate the concentration risk associated with holding individual preferred securities while capturing the overall return characteristics of the broad US preferred market.

This product may be suitable for income-focused investors who are willing to assume a higher level of risk compared to investment-grade bonds in exchange for the potential for higher yields. Investors should be mindful of the risks involved, particularly interest rate risk, as the value of fixed-rate securities typically declines when interest rates rise. Credit risk, the possibility that an issuer may default on its dividend payments, is also a key consideration. The diversified nature of the fund, however, provides a convenient and efficient vehicle for gaining exposure to this unique income-generating segment.