Goldman Sachs Asset Management has introduced a new preferred stock ETF — its fifth fund for 2024. The Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF) began trading on August 8, according to a company press release.
GPRF aims to provide investors with high monthly income, the release said. It does so through exposure to U.S. preferred stocks and hybrid securities.
“Preferreds are back to yielding 6-7% on average, which is consistent with historical context,” Gary Kessler, portfolio manager of GPRF said in an email, explaining the current market opportunity.
Kessler believes these yields are attractive, especially given expectations of near-term Fed rate cuts.
“[P]referreds typically perform well in an easing environment,” he notes.
Preferred Stock ETF Offers Income Potential
The fund capitalizes on the unique characteristics of preferred securities, the release said. These share attributes of both debt and equity. Typically, they offer higher yields than common stock dividends or corporate bonds.
According to the release, GPRF aims to invest across different segments of the preferred stock market.
“The preferred market can be a bit of a niche market in that it includes [two] different trading markets, the over-the-counter traded $1000 par market and the listed $25 par [exchange] traded market,” Kessler said. “GPRF invests across both trading markets, offering a broader universe of investments than some other funds.”
GPRF employs a rules-based approach in its security selection process. Kessler notes that this methodology helps screen out securities with negative yields to their next call dates, which can sometimes occur in the $25 par market due to market dynamics. This screening process aims to enhance the funds yield potential.
The ETF also aims to provide diversification benefits. Kessler points out that preferred stocks “typically have lower correlations to core Investment Grade Fixed Income.”
Goldman Sachs' Expansion 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 already attracted $19.9 million in inflows, according to etf.com data. With GPRF, Goldman now offers 43 ETFs.
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