The combination of an Average People Pillar rating and a Low Process Pillar rating limit  Invesco Preferred ETF to a Morningstar Medalist Rating of Negative.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in corporate bonds and an underweight in A rated bonds compared with category peers. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an 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

Invesco Preferred ETF earns a Low Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. The main detractor from the rating is the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year risk-adjusted success ratio of 42% also limits the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% hinders the process further.

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

The investment seeks to track the investment results (before fees and expenses) of the ICE BofA Core Plus Fixed Rate Preferred Securities Index.  The fund generally will invest at least 80% of its total assets in the components of the index. Strictly in accordance with its guidelines and mandated procedures, ICE Data Indices, LLC selects securities for the index, and which is a market capitalization-weighted index designed to measure the performance of the fixed rate U.S. dollar-denominated preferred securities market.  

 This strategy's 12-month yield is 6.1%, higher than its average peer's 5.9%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 5.8%. While a higher yield may deliver more income, it also tends to indicate higher credit risk.

Process

Invesco’s equity team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are four managers listed on the fund: Richard Ose, Peter Hubbard, Greg Meisenger, Tom Boksa. Together, they manage a total of two strategies, with disappointing prospects. Across the strategies they manage, there is an asset-weighted average Morningstar Medalist Rating of Negative. This indicates the team is projected to generate negative alpha relative to the category median in aggregate. The team has undergone a bout of turnover recently, with Gary Jones leaving within the last two months. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process. 

 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.

Average

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Parent

Invesco Preferred ETF

PGX tracks an index of fixed rate USD-denominated preferred securities.

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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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Invesco Preferred ETF is mainly a financial ETF exposed to preferred shares, with a dominant exposure to the banking sector. The condition of national banks is pretty good in the U.S., especially as they absorb deposits from regional banks with relatively better ability to offer attractive rates. While short-term interest rates may be settling down, long-term rates are a concern for preferred investors, as changes in these rates can significantly impact the value of preferred shares.

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The Invesco Preferred ETF offers a steady stream of income with potential for capital appreciation through fixed-rate US dollar-denominated preferred securities. PGX's portfolio is concentrated in the financial and utilities sectors, with holdings from reputable institutions such as JPMorgan Chase and Wells Fargo. While PGX has consistently delivered dividends, its performance has been underwhelming compared to peers, and there are risks associated with investing in the fund.

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News for Invesco Preferred ETF ETF (PGX)