PGF: My No. 1 ETF Combining Yield And Safety


  • I can think of virtually no long-only ETF that survived intact the difficult two weeks between March 10 and March 23.
  • This includes PGF, which fell from $18.13 to $13.81, more than $4 per share.
  • The Invesco Financial Preferred, PGF, however, recovered to within $1 of its plunge price within a week!
  • During that mid-March period, when there almost were zero bids for fixed income holdings, PGF met all redemption requests with aplomb. 

The Credit Freeze

We should talk first about that credit freeze-up that destroyed so many portfolios. In most bear cycles, a rush out of equities is accompanied, at least in part, by an addition to income holdings. These have most often been the less risky way to wait out a bear cycle – until 2020.

The Great Income Debacle began on March 9 with the bottoming of the U.S. 10-year Treasury yield. That bottoming accelerated as investors large and small rushed to sell their income mutual funds and ETFs and raced instead to buy Treasuries. The Fed did nothing during this early period.

As the next few days continued this exodus from any income fund that was not in 100% Treasuries, these ETFs and some traditional funds had to honor their obligations by paying the redeemers. I say “some” traditional funds because, unlike ETFs, the traditional fund portfolio managers might have kept x percent of their portfolios in cash equivalents like… Treasuries. If they did, their basic portfolio of other holdings went down but then rebounded without the managers having to sell their holdings at fire sale prices.

Such was not the fate for many income ETFs. With a charter to stay close to fully invested, they continued to have to sell off pieces of their portfolio at lower and lower prices until finally the day came when the ETF portfolio managers instructed their traders to sell more holdings. This time the traders came back and said “there are no bids.”

“No bids? That is insane!” responded these portfolio managers. “There have to be bids at some price.”

In fact, the trades spoke the truth. No secondary market firm or market maker wanted any more debt of any company. They were now filled to the brim and prices were still going down.

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Disclosure: I am long PGF.

Disclaimer: I do not know your personal financial situation, so this is not "personalized" investment advice. I encourage you to do your own due diligence on ...

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