Stake Changes in First Trust Institutional Preferred Securities and Income ETF

In the initial quarter, AE Wealth Management LLC enhanced its position in the First Trust Institutional Preferred Securities and Income ETF (NYSEARCA:FPEI), accumulating an additional 3,425 shares, a 2.9% increase. This brought the firm's total holdings to 122,391 shares, or about 0.22% of the total shares in circulation, amounting to $2,050,000.

Various other institutional investors and hedge funds have also revised their stakes in FPEI. Raymond James Financial Services Advisors Inc. grew its position by 10.8% in the first quarter, now owning 59,731 shares. Cetera Advisor Networks LLC, Private Advisor Group LLC, and Empirical Financial Services LLC d.b.a. Empirical Wealth Management have also increased their stakes, with new share purchases of $208,000, $584,000, and $817,000 respectively.

Conversely, Raymond James & Associates reduced its holdings by 12.2% in the first quarter, amounting to a sell-off of 75,245 shares. However, the firm still retains significant holdings of 541,954 shares, which accounts for about 0.97% of FPEI’s total shares valued at $9,078,000.

IFP Advisors Inc. also decided to downsize its holdings in the first quarter by a significant 58.1%, resulting in a decrease of 52,998 shares. This left the fund owning 38,243 shares of the company’s stock, valued at $733,000.

FPEI has experienced fluctuations in its 30-day SEC Yield, which was 5.98% as of May 31st but dropped slightly to 5.71% by May 24th. On both occasions, monthly distributions to shareholders were declared, with an ex-dividend date coming one day before the shareholders of record date.

The First Trust Institutional Preferred Securities and Income ETF has had its performance influenced by certain market events. The fund took a hit due to its significant exposure to the banking industry, which constitutes around 50% of its investments, as the regional banking crisis of 2022 brought about large withdrawals from multiple regional banks across the U.S.

Nevertheless, preferred stocks have been showing resilience. In particular, preferred stock ETFs focusing on different sectors or excluding banks, such as the InfraCap REIT Preferred ETF and the VanEck Preferred Securities ex Financials ETF, have performed well.

As of July 7, 2023, the FPEI's year-to-date performance was down by 2.69%, while the five-year performance showed a gain of 2.69%. The ICE BofA Diversified Core Plus Fixed Rate Preferred Securities Index, a related index, showed a 2.75% gain year-to-date but a 5-year loss of 1.44%.

Meanwhile, the Canadian market has seen the introduction of a unique ETF from Brompton Funds Limited, the first in Canada to solely invest in the preferred shares of split corporations. This ETF seeks to appeal to investors seeking dividend income and capital preservation, offering an initial annualized target rate of 6.25%.

Hamilton Capital Partners Inc. also recently introduced a new ETF, Hamilton Utilities Yield Maximizer ETF, which provides exposure to large Canadian utilities companies. The firm utilizes an active covered-call strategy to enhance monthly income and reduce volatility, with an initial target annualized yield of 13%.

Additionally, BMO Investments Inc. launched several new ETF series of funds, one of which, the BMO Global Enhanced Income Fund ETF Series, invests in a basket of BMO covered-call ETFs. Despite a challenging first year, the ETF continues to provide higher income potential and reduced volatility. Other launches from BMO included the BMO U.S. Equity Growth MFR Fund and the BMO U.S. Equity Value MFR, among others.
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