Virtus InfraCap U.S. Preferred Stock ETF uses borrowed leverage to boost yields, exposing investors to amplified losses during market stress.
Virtus InfraCap U.S. Preferred Stock ETF (PFFA) delivers a 9.67% distribution yield by leveraging up to 25% of its net assets at SOFR-plus rates. This strategy contrasts with unleveraged peers like iShares Preferred and Income Securities ETF (PFF), which yields 5.6% without borrowed funds.
During the March 2020 market downturn, PFFA lost over 52% in weeks and cut its monthly distribution by 21%, while PFF declined only 17%. The fund’s 2.11% expense ratio reflects the cost of leverage, which can amplify losses when credit spreads widen or forced deleveraging occurs.
Analysts recommend PFFA as a 3-5% allocation in tax-advantaged accounts for investors willing to accept equity-like drawdowns due to its leverage risks.