State Street’s New Preferred Stock ETF (STT, PSK)

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Investors have just been given one more trading instrument meant to track a less-followed investment class.  State Street Corporation (NYSE: STT) has announced that its State Street Global Advisors has launched a new ETF to track preferred shares.  This is the SPDR® Wells Fargo® Preferred Stock ETF (NYSE: PSK) began trading on the NYSE Arca this morning. The volume is still extremely thin on this one, but this could be yet another key ETF that serves the very ‘under-served’ preferred stock market for investors.

Its annual expense ratio is 0.45 percent.  The SPDR Wells Fargo Preferred Stock ETF seeks to track the performance of the Wells Fargo® Hybrid and Preferred Securities Aggregate Index. This index includes non-convertible preferred securities with a par amount of $25.00.  These are rated investment grade by Moody’s or Standard & Poor’s, but it appears as though a release came out in March that would allow for some non-investment-grade securities.  The press release did not note that exception though.

These underlying preferreds in this index are also set to have a minimum monthly trading volume of at least 250,000 trading units and is comprised of more than 160 securities.

What is key here is that this preferred stock class is a much better fit for risk-averse investors who want to seek a tad more safety than what they have seen in the realm of common stocks.  Generally, these are meant to offer a higher dividend and less volatility.  That is not always the case, but that is the intent.  These are also meant to offer a slightly higher place in the corporate structure, and that was a key issue for many investors in the last down-cycle.

As this is a new ETF launch, there are currently no knew ratings or rankings available at this time.

Jon C. Ogg
September 17, 2009