Virtus InfraCap US Preferred Stock ETF's recent fee hike underpins a downgrade to this strategy's Morningstar Medalist Rating to Neutral from Bronze. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.  

 The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Virtus InfraCap U.S. Preferred Stock ETF earns an Above Average Process Pillar rating.    The primary contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 55% also bolsters the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by its parent firm's risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.0 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

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


The investment seeks current income and, secondarily, capital appreciation.  Under normal market conditions, the fund will invest not less than 80% of its net assets (plus the amount of any borrowings for investment purposes) in U.S. preferred stock, and in derivatives and other instruments that have economic characteristics similar to such investments. The Sub-Adviser actively manages the fund's assets pursuant to a variety of quantitative, and qualitative and relative valuation factors. The fund is non-diversified.

 This strategy has a 9.5% 12-month yield, higher than its average peer's 5.9%. In addition, it has a 9.8% 30-day SEC yield (a measure similar to yield-to-maturity). Higher yields tend to indicate higher credit risk.

Above Average

Process

Virtus InfraCap U.S. Preferred Stock ETF earns an Above Average People Pillar rating. The most substantial contributor to the rating is the combined average five-year excess return of each manager, which shows that the funds they manage have beat an average manager. The stability of the management team also influences the rating. Specifically, the fund has not seen a manager change in the last six years. 


The team is backed by Jay D. Hatfield, the longest-tenured manager on the strategy, who provides 13 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.3 stars, indicating that their risk-adjusted returns have fallen below the category average. The team is small but adequately equipped, with two other supporting listed managers. Together, the three boast seven years of average listed portfolio management experience. The highest personal investment in this offering by any of its managers is at least $1 million. An investment of that size is large enough to align managers' interests with investors.

People

Virtus Investment Partners has been busy; its actions support an Average Parent rating.

The publicly traded firm uses a multimanager approach. It fully owns all but one of its 13 affiliated asset managers and also uses subadvisors. Since 2020, it purchased five affiliates, expanding its alternative offerings through its 2021 Westchester Capital Management acquisition. It also entered an agreement to buy quant alternatives manager AlphaSimplex, with an expected close in early 2023. Affiliates appreciate Virtus' distribution and back-office strength, while enjoying investment autonomy. Some of its managers are strong, such as  Kayne Anderson Rudnick, which constitutes roughly 30% of Virtus' assets under management.

In 2022, Virtus was forced to find new management for 17 of its funds that were subadvised by Allianz Global Investors, following the SEC disqualification of AGI from providing advisory services to U.S.-registered funds for 10 years. While Virtus had no connection to the AGI strategies at the center of the investigation, it had to find new management for the AGI subadvised funds within 90 days. Virtus maintained some portfolio managers who moved firms, but they hired affiliates for most of the mandates. Some were natural fits, but others were questionable, such as those on Virtus Global Allocation. Meanwhile, Virtus has merged or liquidated a number of funds, and its fees tend to be above average.

Average

Parent

Virtus InfraCap U.S. Preferred Stock ETF

PFFA is an actively managed fund of US preferred stock that leverages the portfolio to varying degrees. The fund seeks current income, with capital appreciation as a secondary goal.

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Virtus InfraCap U.S. Preferred Stock ETF has performed well, only underperforming the S&P 500 by 8% in the past year. The fund offers an attractive dividend yield of 9.47%, paid monthly. The fund has seen considerable inflows, with $641 million flowing into the fund over the last three years.

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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.

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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.

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Virtus InfraCap U.S. Preferred Stock ETF offers a high dividend yield but comes with substantial operating expenses and higher volatility of the ETF's shares. Investors should proceed with caution and consider the potential impact of high expenses and dividend cuts on PFFA's yield in case of a recession. Comparing expenses, yields, and share volatility of peer ETFs is important to make an informed investment decision for long-term investors.

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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.

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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.

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NEW YORK--(BUSINESS WIRE)--The InfraCap MLP ETF (NYSE Arca: AMZA) (the “Fund”) has declared a monthly distribution of $0.26 ($3.12 per share on an annualized basis). The distribution will be paid January 30, 2024 to shareholders of record as of the close of business January 23, 2024. AMZA Cash Distribution: Ex-Date: Monday, January 22, 2024 Record Date: Tuesday, January 23, 2024 Payable Date: Tuesday, January 30, 2024  The Virtus InfraCap U.S. Preferred Stock ETF (NYSE Arca: PFFA) (the “Fund”).

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News for Virtus InfraCap U.S. Preferred Stock ETF ETF (PFFA)