A sound investment process and strong management team underpin iShares Preferred&Income Securities ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's effective investment philosophy earns it an Above Average Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

iShares Preferred&Income Securities ETF earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. The main driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 92% also strengthens the process. Lastly, the process is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to track the investment results of the ICE Exchange-Listed Preferred & Hybrid Securities Index, which measures the performance of a select group of exchange-listed, U.S. dollar-denominated preferred securities, and hybrid securities and convertible preferred securities listed on the NYSE or NASDAQ.  The fund may invest at least 80% of its assets in the component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the component securities of its underlying index.  

 This strategy has a 6.4% 12-month yield, higher than its average peer's 5.9%. It also has a 6.5% 30-day SEC yield (a measure similar to yield-to-maturity). Higher yields tend to indicate higher credit risk.

Above Average

Process

iShares Preferred&Income Securities ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Paul Whitehead, Jennifer Hsui, Greg Savage. The team is well equipped, with an average of 18 years of portfolio management experience. Together, they manage a total of 257 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iSh SP US PrfSt Shs

PFF tracks an index of preferred stock traded on the NYSE and NASDAQ. Securities are selected by rules-based, proprietary methods and weighted by market value.

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We take a look at the action in preferreds and baby bonds through the second week of April and highlight some of the key themes we are watching.

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Preferred shares offer high yields with pricing traits between bonds and equity risk. iShares Preferred and Income Securities ETF is the largest ETF in the segment but has underperformed peers and high-yield bonds. The current portfolio has a 6.8% YTW with a 9yr duration, trading 8% below par.

PFF: Bigger Is Not Always Better

iShares Preferred and Income Securities ETF is a large preferred share ETF with diverse holdings in financials, industrials, and utilities. PFF underperformed the S&P 500 during the pandemic but offers an enticing entry point with a yield of 6.3%. PFF provides defensive exposure with a solid track record of delivering consistent monthly dividends, making it an attractive option for yield-seeking investors.

PFF: Attractive 6.5% Yield To Diversify, While Introducing Price Appreciation Potential

We take a look at the action in preferreds and baby bonds through the fourth week of March and highlight some of the key themes we are watching. Preferreds had a good week as Treasury yields fell on the back of the Fed's more dovish than expected stance. We take a look at how stocks with different spreads over SOFR could react to Fed's cuts.

Preferreds Weekly Review: Keep An Eye On The Spread Of Floating-Rate Preferreds

We take a look at the action in preferreds and baby bonds through the third week of March and highlight some of the key themes we are watching. Preferreds were down for the week due to rising Treasury yields, but most preferred CEF sectors remain positive for the month. Albemarle issued a new preferred stock with a mandatory convertible feature, offering upside participation with less downside than the common and a higher coupon.

Preferreds Weekly Review: Mandatory Convertibles Offer High-Beta Preferred Exposure

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We take a look at the action in preferreds and baby bonds through the fourth week of February and highlight some of the key themes we are watching. Preferreds had a strong week with a 1%+ return, driven by a drop in Treasury yields and compression in credit spreads. Different preferreds sectors have different drawdown profiles, offering investors an opportunity to tilt to more resilient securities in anticipation of the next drawdown.

Preferreds Weekly Review: Historic Drawdowns Are Relevant Again

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We take a look at the action in preferreds and baby bonds through the second week of February and highlight some of the key themes we are watching. Preferreds were flat on the week as higher Treasury yields were offset by tighter credit spreads. A high yield-to-call is not a sufficient reason to buy a given preferred.

Preferreds Weekly Review: A High Yield-To-Call Is Not Enough

We take a look at the action in preferreds and baby bonds through the fourth week of January and highlight some of the key themes we are watching. Preferred stock and baby bond market had a good week with most sectors finishing in the green. The article discusses the curious case of Aspen insurer preferred AHL.PR.C and how the coupon conversion worked on the first call date.

Preferreds Weekly Review: AHL Preferred Gets Stuck Near Libor Peak

The iShares Preferred and Income Securities ETF is a fixed income ETF focused on financials preferred equity. Financials common equity and preferred shares have rallied significantly in the past months, on the back of an easing in macro financial conditions. PFF has a 6.4% yield on a 12-month trailing basis, and 6.6% on a 30-day SEC yield basis, which are beginning to look stretched from a risk/reward perspective.

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iShares Preferred and Income Securities ETF (PFF) has returned a negative 6.65% despite adding back taxable dividends since the last article. The biggest drawback for blindly picking up the entire preferred share asset class today is the low credit spreads. We go over that and three other reasons you should consider exiting this fund.

PFF: 4 Reasons To Exit Preferred Share Fund

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Preferred equities have performed poorly due to rising long-term interest rates, consistently paying around 1-2% more than long-term Treasuries. The yield of preferred equities, such as those in the PFF ETF, is not attractive compared to risk-free options like Treasury bills, which pay over 5% risk-free. There is a significant credit risk in the banking system, with many banks holding preferred equities at risk of being downgraded, leading to significant potential losses in PFF.

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iShares Preferred and Income Securities ETF is the dominant preferred ETF with over $12.76 billion in assets under management. The Invesco Variable Rate Preferred ETF could be getting more attention due to its floating rate exposure that shows less sensitivity to rising interest rates. Both had seen their yields start to rise, but some of those gains for PFF have been reversing more recently, while VRP's payout has continued to rise.

News for iSh SP US PrfSt Shs ETF (PFF)