Invesco PowerShares lists variable-rate preferred securities ETF

May 6th, 2014 | By | Category: Alternatives / Multi-Asset

Invesco PowerShares, a leading global provider of exchange-traded funds, has announced the launch of the PowerShares Variable Rate Preferred Portfolio ETF (VRP) on the NYSE Arca.

Invesco PowerShares lists variable-rate preferred securities ETF

Invesco PowerShares has listed a variable-rate preferred securities ETF on Nasdaq.

The ETF offers income-seeking investors exposure to a portfolio of variable-rate preferred securities.

“We see strong demand for variable-rate preferred securities that offer the potential for high income and less interest rate risk than fixed rate preferred securities in this current market rate environment,” said Dan Draper, Invesco PowerShares Managing Director of Global ETFs. “As the first variable-rate preferred ETF, VRP is designed to help investors meet their risk and return objectives.”

Variable-rate preferred securities are typically issued at rates below fixed-rate preferred securities of similar quality, in exchange for the issuer bearing most of the risk for changes in interest rates. In a rising interest rate environment, the risk/reward profile and tendency of these securities to trade on a yield-to-call basis may provide variable-rate preferred securities the potential to outperform the fixed-rate preferred market. Typically, variable-rate preferred securities exhibit less sensitivity to interest rates than preferred securities which is an important feature for investors interested in building a more diversified income portfolio.

The fund is based on the Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index, a market capitalization-weighted index designed to track the performance of preferred stock, as well as certain types of “hybrid securities” that are functionally equivalent to preferred stock, that are issued by US-based or foreign issuers and that pay a floating or variable rate dividend or coupon. The fund and the index are rebalanced monthly.

“The Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index is designed to track a unique segment of the preferred market that offers both significant income potential and reduced interest-rate sensitivity,” said Daniel Forth, Head of Strategic Indexing at Wells Fargo. “We are excited to partner once again with Invesco PowerShares to meet the needs of today’s investors.”

The fund has a total expense ratio of 0.50%.

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