SPFF Global X SuperIncome Preferred

Global X, the New York City-based issuer best known for its income and sector funds has continued its push into the high yield space with its latest launch. The new product is the SuperIncome Preferred ETF (SPFF) and is the first entrant from the company in the increasingly competitive preferred stock ETF market.

While the new product from Global X may seem similar to other preferred stock ETFs already on the market, investors should note that there are some stark differences between this fund and others already in the space. Expenses are a little high in the new fund—coming in at 58 basis points a year—although the yield is quite robust with the underlying benchmark paying out roughly 7.5% per year (read Guide to Preferred Stock ETF Investing).

This is achieved by following the S&P Enhanced Yield North American Preferred Stock Index, which consists of 50 of the highest yielding American and Canadian preferred stocks which meet various liquidity and size requirements. The benchmark also uses a modified cap-weighting scheme in order to ensure that no one security dominates the index and thus the overall risk/return profile of the fund.

With this focus, the product is heavily concentrated in financials, as these securities account for roughly 89% of assets. The rest of the fund has a slice of assets in utilities, while materials and telecoms also make up about 2% of assets as well (see Market Vectors Debuts Preferred ex Financials ETF).

In terms of individual holdings, securities from Credit Suisse, AIG, and Wells Fargo make up the top three and account for roughly 12% of the assets. Meanwhile, the top ten holdings account for roughly one-third of the total exposure, suggesting that the product is relatively well diversified from an individual holding perspective (read 11 Great Dividend ETFs).

While some investors may be put off by the relatively heavy weight in financials and the somewhat high fees, it should be noted that the product’s underlying index has trounced similar preferred stock benchmarks. According to Standard & Poor’s, the index for SPFF has beaten out the S&P U.S. Preferred Stock index by about 200 basis points over the past five years of annualized returns while also yielding about 37 basis points a year more.

Preferred Stock ETF market

Unfortunately for Global X, however, the preferred stock ETF space is becoming a very crowded corner of the market. Right now there are seven other preferred stock ETFs trading in the U.S. of which five have a similar focus on the broad market (and thus a heavy concentration in financials).

Thanks to this, it could be difficult for Global X to accumulate assets, as the top three funds by AUM in the space already have, combined, over $12.75 billion while only one is more expensive than SPFF. Given this, the fight for assets could be tough for Global X’s new fund, unless the product’s focus on yield can make SPFF the destination for high payouts in the space. If that happens, the New York-based issuer could have another winner on its hands with its latest debut in the ETF world.

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