January 26, 2021 Bond yields are still low, meaning traditional income-generating assets just aren’t cutting it for many investors. Enter preferred stocks and the actively managed PREF can act as a portfolio diversification tool and reducer of correlations. Another advantage of PREF’s active management is that the managers can look for value in an asset class that has been expensive for much of this year. Preferred stocks are a type of hybrid security that show bond- and equity-like characteristics. The shares are issued by financial institutions, utilities, and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds. Additionally, preferred stocks issue dividends on a regular basis, but investors don’t usually enjoy capital appreciation on par with common shares.