Goldman Sachs Asset Management has launched a new preferred stock ETF – its fifth fund for 2024. Goldman Sachs Gains Access to US Preferred Stocks and Hybrid Securities ETF (GPRF) began trading on August 8, according to a press release from the company.
GPRF aims to provide investors with a high monthly income, according to the press release, through exposure to U.S. preferred stocks and hybrid securities.
“Preferreds are once again yielding an average of 6-7%, which is consistent with historical context,” GPRF Portfolio Manager Gary Kessler said in an email, explaining the current market opportunity.
Kessler finds these yields attractive, especially given expectations of near-term rate cuts from the Fed.
“[P]“The companies mentioned tend to perform well in a softening environment,” he notes.
Preferred Stock ETF Offers Income Potential
The fund takes advantage of the unique characteristics of preferred securities, the press release said. They share characteristics of both debt and equity. They typically offer higher yields than ordinary stock dividends or corporate bonds.
According to the press release, GPRF aims to invest in various segments of the preferred stock market.
“The preferred market can be a bit of a niche market because it [two] various trading markets, the over-the-counter traded $1000 par market and the quoted $25 par [exchange] traded market,” Kessler said. “GPRF invests in both trading markets and offers a broader universe of investments than some other funds.”
GPRF uses a rules-based approach in its security selection process. Kessler notes that this methodology helps screen out securities with negative returns for their next call dates, which can sometimes occur in the $25 par market due to market dynamics. This screening process is intended to increase the return potential of the funds.
The ETF also focuses on diversification benefits. Kessler points out that preferred stocks “tend to have a lower correlation to core Investment Grade Fixed Income.”
Goldman Sachs Expands into Municipal Bond ETFs
The launch follows Goldman’s recent expansion into municipal bond ETFs. Last week, the firm introduced four actively managed municipal bond ETFs, including the Goldman Sachs Ultra Short Municipal Income ETF (GUMI) and the Goldman Sachs Municipal Income ETF (GMUB).
Since its announcement, GPRF has attracted $19.9 million in inflows, according to data from etf.com. With GPRF, Goldman now offers 43 ETFs.
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