The ONLY Low Duration Preferred & Income Securities ETF
The AAM Low Duration Preferred & Income Securities ETF (NYSE: PFLD) seeks to generate attractive monthly income, increase portfolio diversification, and reduce the impact of changes in interest rates. This ETF seeks to track the total return performance of the ICE 0-5 Year Duration Exchange-Listed Preferred & Hybrid Securities Index (PHLD).
What makes preferred and hybrid securities an attractive asset class?
CHARACTERISTICS of both common stock and bonds
Like common stock, preferred & hybrid securities represent ownership in a company and have the potential to appreciate (or decline) in price.
Like bonds, they offer a fixed or floating dividend, similar to a bond coupon, and often carry a credit rating from a recognized rating agency.
In the capital structure, preferred and hybrid securities fall between debt holders and common stock holders.
HISTORICALLY HIGHER YIELD vs. traditional fixed income classes
Preferreds have tended to offer higher yields than similarly-rated bonds due to their lower claim on a company’s assets in the event of liquidation.
LOW CORRELATION to traditional fixed income classes
Preferred & hybrid securities have low historical correlations to traditional stocks and bonds, which may help mitigate downside risk in falling markets.
Tax-Advantaged INCOME
Not only have preferred securities tended to offer higher yields than similarly-rated bonds, but they generally pay qualified dividend income, which is taxed at lower rates than ordinary income.
Any tax or legal information provided is a summary of our understanding and interpretation of some of the current income tax regulations and is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Fund nor any of its representatives may give legal or tax advice.
Past performance does not guarantee future results. It is not possible to invest directly in an index. Index information is not representative of any AAM product. Asset classes shown may have significantly different features and risk profiles. US Treasury Bills are guaranteed as to the timely payment of principal and interest and are backed by the full faith and credit of the US Government.
Yield to Maturity Represented By: US Treasuries represented by ICE BofA 7-10 Year US Treasury Index. Municipal Bonds represented by ICE US Broad Municipal Index. Investment Grade Corporates represented by the ICE BofA US Corporate Index. High Yield Corporates represented by the ICE BofA US High Yield Index. Preferreds represented by ICE Exchange Listed Preferred & Hybrid Securities Index. Please see bottom of page for index descriptions.
How does PFLD seek to add value beyond the benefits of preferred and hybrid securities as an asset class?
By adding the AAM Low Duration Preferred & Income Securities ETF (PFLD) to a diversified portfolio, investors gain exposure to an ETF that seeks to generate attractive tax-advantaged income while reducing their exposure to the effects of rising interest rates. Fact Card │ Website
Key Features of PFLD
✔ Exposure to U.S. preferred stocks while potentially reducing exposure to the effects of rising rates
✔ Preferred and hybrid securities have exhibited low correlation to traditional equity and bond strategies
✔ Benefits of the ETF wrapper including low-cost, transparency, flexibility and tax-efficiency
ATTRACTIVE INCOME/DURATION PROFILE: As illustrated below, low(er) duration preferred and hybrid securities offered a higher yield than many other fixed income vehicles, even longer-duration investments.
Past performance does not guarantee future results. It is not possible to invest directly in an index. Index information is not representative of any AAM product. Preferreds represented by ICE Exchange-Listed Preferred & Hybrid Securities Index. High Yield Corporates represented by the ICE BofA US High Yield Index. Investment Grade Corporates represented by the ICE BofA US Corporate Index. US Treasuries represented by ICE BofA 7-10 Year US Treasury Index. Municipal Bonds represented by ICE US Broad Municipal Index. Low Duration Preferreds represented by the ICE 0-5 Year Duration Exchange-Listed Preferred & Hybrid Securities Index. Low Duration Corporates represented by the ICE BofA 1-5 Year US Corporate Index.
MINIMIZED CALL RISK: Preferred and hybrid securities often have call features which allow the issuing company to redeem shares on-demand before they mature for a price specified in the prospectus. Unfortunately, callable securities are often redeemed by their issuing companies after interest rates are reduced because it is in the best interest of the issuers to lower their interest costs. PFLD attempts to minimize this risk by excluding securities which are priced more than 105% of face value, as we believe these securities are more likely to be called.
REDUCED INTEREST RATE RISK: PFLD targets preferred securities with an option-adjusted duration less than five years in an effort to reduce interest rate risk.
COMPLEMENT TO TRADITIONAL INCOME-FOCUSED EQUITY AND FIXED INCOME STRATEGIES. Different sector exposure, particularly versus US High yield. PFLD has exposure to both investment grade and high yield securities.
PFLD seeks to help investors satisfy their current cash flow needs while potentially minimizing the risk of changes in interest rates. Talk to a financial professional or visit www.aamlive.com/ETF to learn more.
Interested in Finding Out More?
The investment objectives, risks, charges and expenses must be considered carefully before investing. Each fund’s statutory and summary prospectuses contains this and other important information about the investment company, and may be obtained by calling 800.617.0004 or visiting www.aamlive.com. Read it carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV) and may trade at a discount or premium to NAV. Shares are not individually redeemable from the Fund and may be only be acquired or redeemed from the fund in creation units. Brokerage commissions will reduce returns. Companies with high yield or payout ratio may underperform other securities in certain market conditions and reduce or discontinue paying dividends entirely while included in the index. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not assure a profit or protect against a loss in a declining market.
The value of a company’s preferred stock will react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition Preferred stock is subject to the risks that a company may defer or not pay dividends, and, in certain situations, may call or redeem its preferred stock or convert it to common stock. During periods of falling interest rates, an issuer of a callable security held by the Fund may “call” or repay the security before its stated maturity, and the Fund may have to reinvest the proceeds at lower interest rates. Investments in small and mid-cap companies may involve less liquidity and greater volatility than larger companies.
Past performance does not guarantee future results. Index performance is not illustrative of fund performance. Please visit www.aamlive.com for fund performance. There is no guarantee that distributions will be made. PFLD expense ratio is 0.45%.
Ratings are subject to change. Credit quality distribution is determined by public credit ratings, typically issued by agencies such as Standard & Poor’s Global Ratings and Moody’s Investors Services, who are the two most prevalent credit rating agencies. If more than one credit rating is presented, an average is determined. Ratings apply to the credit worthiness of the issuers of the underlying securities and not to the Fund itself. Bond ratings are grades given to the bonds to indicate their credit quality as determined by rating agencies including, but not limited to, S&P and Moody’s. Ratings are expressed as letters, ranging from AAA, which is the highest grade, to D, which is the lowest grade. When a rating agency has not issued a formal rating, the adviser will classify the security as non-rated.
Definitions: In the bond markets, a call is an issuer’s right to redeem bonds it has sold before the date they mature. With preferred stocks, the issuer may call the stock to retire it, or remove it from the marketplace. Correlation is a statistical measure of how two variables move in relation to each other with coefficients ranging from +1 to -1. A correlation coefficient of +1 implies that as one variable moves, the other will move in exact lockstep. Alternatively, a correlation coefficient of -1 implies that if one variable moves, the other moves in the same amount in the opposite direction. If the correlation is 0, the movements of the variables are completely random. A coupon is the annual interest rate paid on a bond expressed as a percentage of the face value. Dividend yield is a stock’s annual dividend relative to the stock price. Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. It measures how long it takes, in years, for an investor to be repaid the bond’s price by the bond’s total cash flows. Option-adjusted duration is duration adjusted to account for the change in cash flows of the bond’s embedded option. Yield to Maturity is the total annual return on a bond investment if held to maturity. The ICE 0-5 Year Duration Exchange-Listed Preferred &&Hybrid Securities Index (PHLD) is an unmanaged index that tracks the performance of shorter duration exchange-listed US dollar denominated hybrid debt and preferred stock publicly issued by corporations in the US domestic market. The ICE Exchange-Listed Preferred &&Hybrid Securities Index (PHGY) is an unmanaged index that tracks the performance of exchange-listed US dollar denominated hybrid debt, preferred stock and convertible preferred stock publicly issued by corporations in the US domestic market. The ICE BofA US High Yield Index (H0A0) is an unmanaged index that tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. The ICE US Broad Municipal Index (MUNI) is an unmanaged index that tracks the performance of US dollar denominated investment grade tax-exempt debt publicly issued by US states and territories, and their political subdivisions, in the US domestic market. The ICE BofA 7-10 Year US Treasury Index (G4O2) is an unmanaged index that tracks the performance of US dollar denominated sovereign debt publicly issued by the US government in its domestic market including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 10 years. The ICE BofA 1-5 Year US Corporate Index (CVA0) is an unmanaged index that tracks the performance of US dollar denominated corporate debt publicly issued in the US domestic market with a remaining term to final maturity greater than or equal to 1 year and less than 5 years. Cash flow is the net amount of cash and cash-equivalents moving into and out of a business.
Source ICE Data Indices, LLC, is used with permission. ICE® is a registered trademark of ICE Data Indices, LLC or its affiliates and has been licensed, along with the ICE 0-5 Year Duration Exchange-Listed Preferred & Hybrid Securities Index (“Index”) for use by Advisors Asset Management (AAM) in connection with the AAM Low Duration Preferred & Income Securities ETF (the “Product”). Neither AAM, ETF Series Solutions (the “Trust”) nor the Product, as applicable, is sponsored, endorsed, sold or promoted by ICE Data Indices, LLC, its affiliates or its third party suppliers (“ICE Data and its Suppliers”). ICE Data and its Suppliers make no representations or warranties regarding the advisability of investing in securities generally, in the Product particularly, the Trust or the ability of the Index to track general market performance. Past performance of an Index is not an indicator of or a guarantee of future results.
ICE DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND THE INDEX DATA, WHICH ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN RISK.
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