PFFA vs PFFD: Weighing Active Leverage Against Low-Cost Passive Exposure in Preferred ETFs

Key Takeaways

• PFFA is an actively managed, non-diversified preferred-stock fund that uses leverage to boost income, while PFFD is a passive, index-tracking fund offering broad, diversified exposure.
• Cost is a defining difference: PFFA carries a 2.11% expense ratio versus just 0.23% for PFFD, a gap that materially affects long-term total return.
• PFFA tilts toward financials (roughly 53%) and real estate (about 17%) with a higher distribution yield, while PFFD is even more financials-heavy (around 71%) with a lower but steadier yield.
• Structural risk differs sharply — PFFA's leverage and concentrated, non-diversified mandate make it more volatile than PFFD's unleveraged, diversified index approach.
• Tickeron AI Verdict: Based on cost efficiency, diversification, and structural risk, Tickeron's AI currently favors PFFD.

Why These Two Preferred ETFs Matter

Preferred-stock ETFs occupy an interesting middle ground between equity-like yields and bond-like income, which makes them worth examining when balancing income needs against interest-rate exposure. Comparing PFFA and PFFD highlights two distinct approaches to the same asset class. PFFA relies on active management and leverage to maximize current income, whereas PFFD delivers a low-cost, rules-based way to access the U.S. preferred market. They do not compete head-to-head but instead illustrate different answers to the question of how to generate preferred-stock income while navigating rates, credit, and concentration risks.

Virtus InfraCap U.S. Preferred Stock ETF (PFFA) at a Glance

PFFA is an actively managed fund focused primarily on current income, with capital appreciation as a secondary objective. It typically invests at least 80% of net assets in U.S. preferred stock and related derivatives and is classified as non-diversified, allowing larger positions in individual issuers. The fund also uses leverage through bank borrowings, which can amplify both income and volatility.

The portfolio contains roughly 190 to 200 preferred positions. Sector weights are led by financials at about 53%, followed by real estate at roughly 17%, with industrials near 8% and smaller allocations to communication services, utilities, information technology, and energy. Top holdings often include preferred securities from Strategy Inc., Flagstar Bank, KKR, Oracle, Qwest, Telephone and Data Systems, Energy Transfer, and Boeing. The expense ratio stands at 2.11%, including a 0.80% management fee, and the fund distributes monthly. Its distribution yield has recently hovered around 8.6%, reflecting both the income focus and leverage.

Global X U.S. Preferred ETF (PFFD) at a Glance

PFFD is a passively managed fund that tracks the ICE BofA Diversified Core U.S. Preferred Securities Index, a capitalization-weighted benchmark with a 4.75% per-issuer cap. It holds approximately 220 to 250 preferred issues and is classified as diversified, with no leverage employed.

The portfolio is heavily tilted toward financial issuers, representing about 71% of exposure, with utilities and a modest technology component providing some balance. Notable holdings include preferred and convertible-preferred securities from Boeing, Hewlett Packard Enterprise, Oracle, Wells Fargo, Citigroup, KKR, NextEra Energy, Southern Company, Microchip, and Bank of America. The expense ratio is 0.23%, among the lowest in the category, and monthly distributions have been paid since the 2017 launch. Trailing yields have recently ranged from 6.4% to 6.8%.

The Preferred Securities Market Context

Both funds operate in a market structurally dominated by financial issuers that issue preferred shares for regulatory and hybrid capital purposes. Preferred securities are sensitive to interest rates: rising Treasury yields typically pressure fixed-coupon prices, while falling or stable yields tend to support the asset class. Recent periods have seen the Federal Reserve move from restrictive policy toward cuts, ongoing inflation considerations, and bank stress-test results, all of which influence valuations. Credit quality has generally held up well, but the heavy financials weighting means bank sentiment and capital rules remain important drivers for both ETFs.

Performance and Positioning Trade-Offs

Over recent market cycles, PFFA has delivered stronger absolute total returns than PFFD, supported by leverage and a tilt toward higher-yielding, often non-investment-grade preferreds. That edge has come with noticeably higher volatility and drawdown potential. PFFD, in contrast, has produced more moderate, index-like returns with lower dispersion, consistent with its unleveraged and diversified structure plus heavier weighting in large financial names.

The positioning boils down to a clear trade-off. PFFA accepts higher costs and less diversification to pursue elevated income and active alpha, while PFFD emphasizes low fees, broad coverage, and structural simplicity. In rate-sensitive periods, both funds tend to move in the same direction, though PFFA's leverage magnifies the moves.

How I Incorporate Tickeron Tools

When reviewing relative strength between funds like these, I often turn to Tickeron’s AI Screener for a structured view of momentum and technical factors across the category.

A Research Tool I Find Useful

In my own work comparing ETFs such as PFFA and PFFD, Tickeron’s AI Screener has become a regular part of the process. It lets me apply technical patterns, fundamentals, volatility measures, and AI signals to scan thousands of securities quickly, helping surface relative-strength insights without manual effort. The customizable filters for industry, market cap, and performance metrics make it straightforward to evaluate how these funds stack up against peers.

Disclaimer

The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.

Disclaimers and Limitations

Contributor

Scott Bell|Expert

I’m a trader and independent researcher. My interest lies at the intersection of financial markets, algorithms, and capital management. I develop data-driven tools and strategies and study algorithmic approaches to market analysis. I help turn complex market data into clear insights and practical systems. I believe technology should support, not replace, investment thinking

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