This is an active ETF that invests mainly in preferred stocks and capital securities issued by US and international financial institutions. Its primary objective is total return, with income generation as a secondary objective, and a team of professional managers actively selects the securities.

It suits investors who want steady income and total return together, with lower volatility than equities.

The ETF is managed by PIMCO using an active (actively managed) approach.

The fund does not track an index. Instead, PIMCO's managers actively select securities across global bank capital securities, non-financial preferred stocks, and corporate hybrid markets. By holding a broad range of preferred stocks and capital securities with varying credit ratings and maturities, the fund manages volatility while pursuing income and total return together.

• Active management built on PIMCO's global fixed income research
• Exposure to preferred stocks and capital securities, aiming for lower volatility than equities

Assets under management (AUM) stand at $233.9M, and the total expense ratio is 0.73% per year.

Unlike index-tracking ETFs, performance depends on the managers' security selection skill, so the fee burden tends to be higher than that of passive funds.

Preferred stocks and capital securities react sensitively to interest rates and the credit environment, and recent trends have also been influenced by the direction of rates and changes in financial sector credit spreads. Compared with equities, the fund aims for lower volatility.

Capital tends to flow into the preferred stock and capital securities asset class when demand for income is high, and rate-cut phases generally create a relatively favorable environment for high-dividend and income assets.

Its strengths are professional active management and monthly income, while its weaknesses are interest rate and credit risk and fees that are higher than those of passive funds.

CGBL, IALT, ALLW, DRSK and CTA, shown in the table, belong to the same active alternative strategy category, but their asset classes and approaches differ, so they are hard to regard as direct substitutes. For comparison targets focused on the preferred stock asset class, you can also consider passive preferred stock ETFs such as PFF and PGX, as well as an active preferred stock income ETF such as PFFA.

These are the points to review before investing in PRFD. As an active preferred stock and capital securities ETF, it is important to check its interest rate sensitivity, sector concentration, and fee structure in advance.

Rising interest rates and deteriorating credit in the financial sector are the main drivers of price declines. Even with active management, the fund still bears the market risk of the preferred stock and capital securities asset class itself.

This is an active ETF worth considering for investors who want income and total return together with lower volatility than equities. To reduce cost burden, consider a passive preferred stock ETF; if you value management capability and monthly income, you can consider PRFD.