PFXF's Competitive Edge in the Preferred Securities Market: A High-Yield, Diversified Alternative

The VanEck Preferred Securities ex Financials ETF (PFXF) has carved a unique niche in the preferred securities market by combining a low expense ratio with a non-financial sector focus, positioning it as a compelling alternative to traditional income vehicles like high-yield bonds and broad-based preferred securities funds. With a net expense ratio of 0.40%—59% below the category average—PFXF offers investors a cost-efficient gateway to a diversified income portfolio [1]. This advantage becomes even more pronounced when compared to high-yield bond funds such as the SPDR Blackstone Senior Loan ETF (SRLN, 0.70%) or the Virtus Private Credit ETF (VPC, 9.7%), which carry significantly higher fees [2].

PFXF’s exclusion of financial sector holdings further differentiates it. By focusing on non-financial corporations, the fund mitigates the interest rate sensitivity often associated with financials, which dominate broader indices like the Financial Select Sector Index [3]. Instead, PFXF allocates at least 80% of its assets to hybrid debt, preferred stock, and convertible preferred stock from sectors such as technology, utilities, and telecommunications. Notable holdings include Boeing and NextEra Energy, which provide exposure to stable, non-cyclical income streams [4]. This diversification strategy not only reduces sector-specific risk but also taps into the growth potential of non-financial industries, offering a more balanced approach to income generation.

The fund’s dividend yield of 7.48% for the trailing twelve months [5] underscores its appeal as a high-yield option. While slightly lower than PFFV’s 7.58%, PFXF’s yield remains competitive with traditional fixed-income investments, particularly in a low-interest-rate environment. Its non-financial focus also enhances resilience during market volatility, as non-financial sectors tend to exhibit less correlation with interest rate fluctuations compared to their financial counterparts [3].

Critically, PFXF’s structure addresses a key limitation of traditional income vehicles. High-yield bonds, for instance, are often perceived as riskier due to their reliance on corporate debt, while broad preferred securities funds like PFF remain exposed to the volatility of financials. PFXF bridges this gap by offering a middle ground: the income potential of preferred securities with the diversification benefits of non-financial sectors and the cost efficiency of a low-fee ETF.

In conclusion, PFXF’s competitive edge lies in its ability to harmonize low costs, sector diversification, and high yield—a combination that challenges conventional income strategies. For investors seeking to optimize their fixed-income allocations while minimizing interest rate risk, PFXF represents a well-structured, innovative solution.

Source:
[1] VanEck Preferred Securities ex Financials ETF [https://www.vaneck.com/us/en/investments/preferred-securities-ex-financials-etf-pfxf/]
[2] The 7 Best High-Dividend ETFs to Buy Today [https://money.usnews.com/investing/articles/best-high-dividend-etfs]
[3] PFXF - VanEck Preferred Securities ex Financials ETF [https://www.sumgrowth.com/etf-profile/invest-in-PFXF-etf.html]
[4] PFF vs. PFXF: Head-To-Head ETF Comparison [https://etfdb.com/tool/etf-comparison/PFF-PFXF/]
[5] VanEck Preferred Securities ex Financials ETF (PFXF) [https://www.slickcharts.com/symbol/PFXF/dividend]