EVPF delivers income from preferred securities while actively managing credit risk and interest rate exposure. The fund targets higher yields than investment-grade bonds by focusing on hybrid securities that sit between debt and equity in the capital structure.
How It Works
The fund actively selects preferred stocks, convertible securities, and hybrid instruments from financial institutions and utilities. Portfolio managers adjust duration, credit quality, and sector exposure based on market conditions. Unlike passive preferred ETFs, EVPF can tactically shift between fixed-to-floating preferreds, perpetuals, and convertibles to optimize yield and manage rate sensitivity.
Key Features
- Active management allows tactical shifts between preferred structures as rate cycles change
- Broader mandate than pure preferred funds - can own converts and hybrid debt
- Eaton Vance's credit research depth in financials where most preferreds originate
Risks
- Bank preferreds can lose 30-50% in financial crises as they're subordinated to deposits
- Duration risk varies wildly - perpetual preferreds act like 30-year bonds in selloffs
- Liquidity evaporates in stressed markets - bid-ask spreads can widen to 2-3%
Who Should Own This
Best for income investors who want 6-8% yields but can stomach equity-like volatility during credit events. Works as a satellite position (5-10% of income allocation) for those overweight traditional bonds. Requires patience through rate cycles - preferreds can underperform for 12-18 months when rates spike.