It is a passive ETF that tracks an index of preferred stocks and income securities with short maturities and durations. It focuses on short-duration preferred stocks, which are less sensitive to interest rates than conventional preferreds, and pursues a high distribution yield.

It suits income-oriented investors who want the high distribution yield of preferred stocks but also want to keep maturities short to reduce interest rate risk.

It is a passive (index-tracking) ETF managed by AAM.

It tracks an index of preferred stocks and income securities with short maturities and durations. By focusing on short-term preferreds that are less sensitive to interest rates than conventional preferreds, it pursues a high distribution yield while lowering interest rate risk, combining the income of preferred stocks with low rate sensitivity.

• Exposure to short-duration preferred stocks
• High distributions combined with low interest rate sensitivity

Assets under management (AUM) stand at $372.3M, and the total expense ratio is 0.45% per year.

Compared with the conventional preferred stock ETFs PFF and FPE, the main points of comparison are its shorter duration and lower interest rate sensitivity.

Preferred stocks are driven by the interest rate environment, issuer credit quality and risk appetite. When rates rise, conventional preferreds tend to weaken, while short-duration preferreds show relatively smaller price swings. By nature, preferred stocks sit between equities and bonds.

Fund flows into preferreds diverge depending on the rate outlook, the credit environment and demand for distribution income, and income demand from investors seeking to reduce interest rate risk can also draw money into related products. It is also worth noting that performance varies with rates and credit conditions.

Its strengths are high distributions and low interest rate sensitivity, while credit risk, financial sector concentration and risks unique to preferred stocks are the considerations.

For exposure to conventional-duration preferred stocks, direct substitutes include PGX and PGF, and for a higher weighting in non-financial issuers, products such as PFXF are also worth comparing. For exposure to floating-rate preferreds, a product such as VRP can be considered as well. The three products shown in the table, PFF, FPE and CSPF, all invest in preferred stocks but differ in that they hold conventional preferreds with no duration limit. This ETF's differentiator is its narrower exposure to short-duration preferred stocks.

Here are the points to review before investing in PFLD. High distributions and low interest rate sensitivity are attractive, but credit risk, financial sector concentration and risks unique to preferred stocks should be checked in advance. It is also a good idea to compare it with conventional preferred stock products.

Deteriorating issuer credit, financial sector concentration and risks unique to preferred stocks are the main variables for short-term performance. Although the short duration lowers interest rate risk, credit risk remains. In an economic slowdown, preferred stock prices can wobble.

It is a suitable candidate for income-oriented investors who want the high distributions of preferred stocks while reducing interest rate fluctuations. If you want conventional-duration preferreds, consider products such as PGX and PGF, and if you want short-duration preferreds, this product. Comparing them together before choosing is advisable.