Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF) seeks to track an index of U.S. preferred stocks and hybrid securities, which are debt-equity instruments that pay fixed dividends like bonds but trade on stock exchanges and offer potential capital appreciation.
How It Works
GPRF uses a passively managed approach to replicate its benchmark index of preferred stocks and hybrid securities issued by U.S. companies. The fund holds individual preferred shares and convertible securities rather than derivatives, providing direct exposure to these income-generating instruments. Holdings are weighted by market capitalization with regular rebalancing to maintain index alignment. The portfolio typically contains 100-300 securities across various sectors including financials, utilities, and REITs.
Key Features
- Launched in August 2024, offering access to preferred stock market with 4.54% dividend yield for income-focused investors
- Direct ownership of preferred shares rather than derivatives provides transparent exposure to this specialized asset class
- Focuses on hybrid securities that combine bond-like income stability with equity-like growth potential and liquidity
Risks
- This ETF can lose value when interest rates rise, as preferred stocks are sensitive to rate changes and could decline 10-20% in rising rate environments
- Credit risk exists if issuing companies face financial distress, potentially leading to dividend cuts or suspensions that reduce income and share prices
- Limited liquidity in preferred stock market during stress periods could cause wider bid-ask spreads and difficulty executing large trades efficiently
Who Should Own This
Best suited as a satellite holding (5-15% of fixed income allocation) for income-focused investors with 3-5 year time horizons seeking higher yields than traditional bonds. Medium risk tolerance required due to interest rate sensitivity. Ideal for retirees or dividend investors wanting diversification beyond common stocks and corporate bonds.