John Hancock launches preferred income ETF

Jan 6th, 2022 | By | Category: Alternatives / Multi-Asset

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John Hancock Investment Management has announced the launch of the John Hancock Preferred Income ETF (JHPI US), sub-advised by Manulife Investment Management.

John Hancock launches preferred income ETF

John Hancock Investment Management has expanded its ETF lineup with the launch of a preferred income ETF on NYSE Arca.

Listed on NYSE Arca, the fund is actively managed and seeks to provide a high level of current income, consistent with the preservation of capital.

Under normal market conditions, the fund invests at least 80% of its net assets in preferred stocks and other preferred securities.

Preferred stocks and preferred securities include convertible preferred securities, corporate hybrid securities, Trust Preferred Securities, cumulative and non-cumulative preferred stock, and depositary shares of preferred stock.

Preferred securities typically have debt and equity characteristics and generally pay fixed or adjustable-rate distributions to investors and have preference over common stock in the payment of distributions and the liquidation of a company’s assets but are generally junior to all forms of the company’s debt.

The fund may invest up to 20% of its net assets in common stocks or other equity securities that are not considered preferred securities and in debt securities with ratings equivalent to those of the preferred securities in which the fund may invest. Debt securities in which the fund may invest include corporate bonds, high-yield securities and contingent convertible securities (CoCos).

The fund will invest at least 50% of its net assets in preferred securities and other fixed-income securities that are rated investment grade or in unrated securities determined by the manager to be of comparable credit quality.

The fund can invest up to 50% of its net assets in preferred securities and other fixed income securities that are rated below investment grade. Below-investment-grade securities must be rated “B” or higher by either S&P, Fitch, Moody’s or by any NRSRO (or determined to be of comparable quality).

The manager focuses on sector allocation, industry allocation and security selection in making investment decisions and looks to invest in securities that may be undervalued relative to similar securities in the marketplace.

The fund currently holds 106 securities and exhibits a distribution yield of 4.04%. Notable issuers presently include DTE Energy (3.6%), Morgan Stanley (3.4%), Dominion Energy (3.3%), Wells Fargo & Company (3.2%) and Algonquin Power & Utilities (3.1%).

It has been seeded with $15 million in assets and comes with a net expense ratio of 0.54%.

Day-to-day portfolio management is overseen by Joseph H. Bozoyan, CFA, and Bradley L. Lutz, CFA, investment managers at Manulife Investment Management.

Andrew G. Arnott, CEO, John Hancock Investment Management and head of wealth and asset management at Manulife Investment Management, said: “We’re excited to launch our first ETF focused on preferred securities. Manulife Investment Management has been managing preferred strategies for nearly 20 years in our closed-end funds and is one of the largest preferred managers in the world. We are pleased to make John Hancock Preferred Income ETF available to investors who may want to use the ETF structure to access this asset class.”

Steven L. Deroian, co-head of retail product, John Hancock Investment Management, added: “There is demand in the market to diversify sources of income. Preferred securities may provide more favourable yields with less interest-rate sensitivity than traditional bonds. We see JHPI providing a new opportunity for investors and asset allocators who may be interested in diversifying their income sources and return characteristics.”

John Hancock Investment Management launched its first ETFs more than six years ago. With this announcement, the firm’s ETF offering has grown to 18 ETFs across preferred securities, mortgage-back securities, corporate bonds, US and international equities, plus a range of sector-specific products.

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