Goldman Sachs Asset Management launched a new preferred stock ETF — its fifth fund for 2024. Goldman Sachs Access US Preferred Stock and Hybrid ETF (GPRF) began trading on Aug. 8, according to a company press release.
The GPRF aims to provide investors with a high monthly income, the statement said. To do this, it takes exposure to U.S. preferred stocks and hybrid securities.
“Preferred bonds have returned to an average yield of 6-7%, which is consistent with historical conditions,” GPRF portfolio manager Gary Kessler said in an email, explaining the current market opportunity.
Kessler believes these yields are attractive, especially given expectations of Fed rate cuts in the near term.
“[P]“Referred people usually do well in a supportive environment,” he notes.
Preferred Stock ETFs Offer Income Potential
The fund capitalizes on the unique characteristics of preferred securities, the release said. They share attributes of both debt and equity securities. They typically offer higher yields than common stock dividends or corporate bonds.
According to the statement, GPRF aims to invest in different segments of the preferred stock market.
“The preferred market can be a niche market to the extent that it includes [two] different trading markets, the over-the-counter market at $1,000 and the listed market at $25 [exchange] “GPRF invests in both equity markets, offering a broader investment universe than some other funds,” Kessler said.
GPRF uses a rules-based approach in its security selection process. Kessler notes that this methodology eliminates securities with negative yields on their next call date, which can sometimes occur in the $25 bond market due to market dynamics. This selection process is intended to improve the fund’s return potential.
The ETF also aims to offer diversification benefits. Kessler points out that preferred stocks “typically have a lower correlation to investment-grade fixed income securities.”
Goldman Sachs Expands Into Municipal Bond ETFs
The launch follows Goldman’s recent expansion into municipal bond ETFs. Last week, the firm launched four actively managed municipal bond ETFs, including the Goldman Sachs Ultra Short Municipal Income ETF (GUMI) and the Goldman Sachs Municipal Income Exchange Traded Fund (GMUB).
Since its announcement, GPRF has already attracted $19.9 million in inflows, according to data from etf.com. With GPRF, Goldman now offers 43 ETFs.
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