Invesco Preferred Shares UCITS ETF Acc

Issuer: Invesco

Asset Class: Equity

TER: 50bps

Trading Currency: USD

Pays Income: False

Listing Date: 10 Dec 2018

Ticker: PRAC

ISIN: IE00BG482169

This fund provides targeted exposure to the global market of preferred shares, which are hybrid securities that blend characteristics of both stocks and bonds. Preferred shares typically offer fixed, regular dividend payments that have priority over dividends for common shareholders, often resulting in higher yields compared to both common stocks and traditional high-quality bonds from the same issuer. By investing in a diversified portfolio of these instruments, the fund aims to deliver a steady income stream, making it an attractive option for investors seeking yield in a low-interest-rate environment. The passive management approach ensures that the portfolio closely mirrors the composition of a dedicated preferred securities index, providing broad and representative market exposure at a competitive cost.

The underlying portfolio primarily consists of fixed-rate preferred securities issued by corporations in developed markets, with a substantial concentration in the United States. A significant portion of the assets is allocated to the financial sector, including major banks, insurance companies, and diversified financial services firms, which are historically the largest issuers of preferred shares. This focus on established financial institutions in stable economies helps to mitigate some of the credit risk associated with this asset class. The fund's holdings are predominantly rated investment grade, further enhancing its defensive characteristics compared to high-yield corporate bonds or equities.

This instrument can serve as a valuable diversifier within a broader investment portfolio. For income-focused investors, it offers the potential for enhanced yield without taking on the full volatility of the equity markets. Its performance is often influenced by movements in interest rates, similar to traditional bonds, but it also carries equity-like features, such as the potential for price appreciation. As an accumulating share class, any income generated is automatically reinvested, facilitating long-term capital growth through the power of compounding. This structure is particularly beneficial for investors who do not require immediate income and prefer to grow their capital base over time.