CSSD targets the sweet spot between preferred stock yields and short-term bond stability, actively managing a portfolio of preferred securities and income-producing assets with limited duration risk. This gives investors access to the higher yields of preferreds without the gut-wrenching volatility of perpetual preferred funds.
How It Works
Cohen & Steers actively selects preferred securities, focusing on those with near-term call dates or floating rates to minimize interest rate sensitivity. The fund can also hold corporate bonds, convertibles, and other income securities when they offer better risk-adjusted returns. Unlike passive preferred ETFs that hold everything, CSSD can dodge troubled issuers and rotate between fixed-to-floating preferreds, traditional preferreds, and baby bonds based on relative value.
Key Features
- Active management from preferred specialists who've run institutional money since 1986
- Short duration focus (likely 2-4 years) versus perpetual preferred funds at 6-8 years
- Flexibility to own baby bonds and corporates when preferreds look expensive
Risks
- Bank concentration risk — financials issue 70%+ of preferreds, so a banking crisis could hammer NAV 10-20%
- Call risk means your best holdings get yanked away when rates fall, forcing reinvestment at lower yields
- Active management risk — Cohen & Steers could misread credit quality or duration, underperforming passive alternatives
Who Should Own This
Perfect for income investors who want preferred stock yields (currently 6-8%) but can't stomach the 20%+ drawdowns of perpetual preferred funds during rate spikes. Also suits conservative portfolios looking to juice yield beyond investment-grade corporates without venturing into high-yield territory. Think of it as a Treasury ladder alternative with 200-300bps more yield and modestly more credit risk.