Principal Spectrum Preferred Secs Active ETF

Principal Spectrum Preferred Securities Active ETF (PREF) is an actively managed fund that holds preferred securities. Most are large "$1,000 par" issues sold to institutions by banks, insurers and other companies. It pays monthly, and its trailing 12-month yield was 5.4% as of October 27, 2026. Its 0.55% expense ratio is lower than the 0.85% charged by First Trust's two preferred ETFs. It leans heavily on financial companies and long-dated securities.

• Over the year to Oct 27, 2026, PREF returned +0.6%, 4th of 6 among similar funds.
• Its 5-year annualized return was +2.5%.
• In the 2020 COVID crash it fell 23% and regained its old high 5.2 months after the low.
• Its worst full calendar year was 2022 (-11.7%); its best was 2019 (+17.3%).
• The deepest fall in its price history was 23% (Feb 21, 2020 to Mar 19, 2020), recovered by Aug 25, 2020.

As of Jun 30, 2026, the fund held 160 securities; the ten largest made up 20.14% of assets, and 2.17% sat in cash and money-market holdings.

The bonds mature in 24.1 years on average (weighted by size), with an average coupon of 6.38%.

• Over the three months to Jun 30, 2026, investors added a net $310.6M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +1.40%, +0.58%, +0.47%.

PREF does not track an index. The fund's investment team picks what it owns. Under normal conditions, it puts at least 80% of net assets into preferred securities. These include preferred stock, certain depositary receipts and junior subordinated debt. That is debt that ranks below a company's senior bonds, and the issuer can defer interest payments without being in default. This is why 98.49% of the portfolio was classified as bonds and notes as of June 30, 2026.

The managers focus on "$1,000 par" preferreds, which are issued in large lots to institutions, mostly by banks, insurers and finance companies. The fund keeps more than 25% of its net assets in those financial industries. It may buy junk-rated securities, meaning those rated Ba1 or BB+ or lower. When the rating agencies disagree, the higher rating counts. As of June 30, 2026, it held securities from 160 issuers, and the 10 largest positions made up 20.14% of assets. The biggest were Bank of America, MetLife, Enbridge and Toronto-Dominion Bank. About 66% was in US issuers and 23% in Canadian ones.

The prospectus sets no fixed rebalancing schedule. The team trades as it sees fit, and portfolio turnover was 34.1%. The average holding had 24.1 years to maturity and a 6.38% coupon, so prices react strongly to interest-rate changes. The fund held no derivatives as of June 30, 2026.

• PREF charges 0.55% a year, versus an average of 0.56% for the similar funds below (4th of 6, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $56 in the first year and $689 over 10 years (assuming a 5% annual return).

The fund's main job is monthly income from preferred securities, and the trade-off is price swings tied to banks and interest rates.

PREF could add a monthly income stream to a portfolio. Its trailing 12-month yield was 5.4%, or $0.99 per share, as of October 27, 2026. Its 0.55% expense ratio costs $56 in the first year and $689 over 10 years in the SEC's standard $10,000 example. The fund launched in 2017, so it has no 2008 record. In the 2020 COVID crash it fell 23% in under a month, then got back to its old high by August 25, 2020. The 2022 drop was smaller, at 14.8%, but recovery took about 19 months. 2022 was also its worst calendar year, at -11.58%. Anyone forced to sell during a slump like that would lock in losses. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).