Hear Me Roar: PFFA's Rocky Ride
Fire Escape: Leaping from One Dilemma into Another (Prefers Privacy-Focused Alternatives Association reference)
The Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA: PFFA) might as well be a lion in the wilderness, facing one challenge after another since its debut in 2018.
Launching with a bang on May 15, 2018, this actively managed fund had a aims of milking U.S. preferred stocks for current income and a bit of capital appreciation. Virtus Investment Partners, the nifty folks behind the venture, brought it to life[3].
But life in the jungle isn't always easy, as PFFA found out.
When the Going Gets Tough...
High-quality preferred stocks? Check. Consistent high returns? Unfortunately, not so much. So, what gives?
- Rate of Change: Welcome to the dance floor, interest rate volatility. Preferred stocks can't resist a dip when interest rates rise, making these yummy yields less attractive and causing prices to plummet[5].
- Credit Crunch: The fund's performance is closely tied to credit market conditions. Wider credit spreads can put a real damper on preferred stocks' prices[5].
- Leverage Game: PFFA plays with fire—in a good way. The fund uses a conservative leverage strategy to amplify income, but this means it can also magnify losses during intense volatility or rising rates[5].
The Storm Before the Calm
- COVID Chaos (2020): COVID-19 brought turmoil galore, sending fixed-income securities reeling. Many preferred stocks were vulnerable due to liquidity issues and economical wobbles. PFFA, like other fixed-income funds, wasn't immune[5].
- Waves of Tumble (2022–2023): The skyrocketing interest rates and economic instability made 2022 a cruel year for fixed-income investments. Fancy funds like PFFA didn't escape the rough surf[5].
- 2025: A Year to Forget?: By the first quarter of 2025, PFFA reported a year-to-date return of -2.95%. Translation: a wobbly start to the year[4].
The Silver Lining
Despite the fund's tumultuous ride, investors chasing juicy yields are still drawn to PFFA's stable dividend payments and quality holdings[5]. Even with the recent drawdowns, this income-seeker remains a popular choice for folks brave enough to venture into fixed-income markets[5]. So, as they say, when life gives you lemons, make lemonade—or in this case, high-yielding preferred stock returns. Here's to hoping PFFA finds a smoother road ahead!
- In the face of repeated challenges, the Virtus InfraCap U.S. Preferred Stock ETF (PFFA), reminiscent of a lion in the wild, has demonstrated resilience since its 2018 debut, aiming to generate income and modest capital appreciation through U.S. preferred stocks.
- Despite holding high-quality preferred stocks, PFFA has struggled to deliver consistent high returns, with factors such as interest rate volatility, credit market conditions, and conservative leverage strategy contributing to its challenges.
- In 2020, the COVID-19 pandemic brought turbulence to fixed-income securities, causing vulnerable preferred stocks like those in PFFA to suffer due to liquidity issues and economic instability.
- The years 2022–2023 saw soaring interest rates and economic instability, causing immense hardship for fixed-income investments like PFFA, resulting in significant drawdowns.
