Tag Archives: author

Build Your Own Leveraged ETF (ETRACS Edition)

Summary A previous article showed that the ETRACS 2x ETNs did not inexorably decay in value even over several years. Other authors have investigated the idea of using leveraged funds to build your own ETF. The application of this strategy to the ETRACS 2x ETNs are investigated, revealing the potential for additional yield. Introduction The ETRACS line-up of ETNs issued by UBS (NYSE: UBS ) provides investors with exposure to a broad range of investment classes. A number of the ETRACS ETNs are 2x leveraged, which means that they seek to return twice the total return of the underlying index, minus fees. This allows the ETNs to offer alluring headline yields, making them attractive for income investors. Additionally, some of these funds pay monthly distributions, although these can be lumpy. A recent article provides an overview of the types, yields and expense ratios of these 2x leveraged ETNs. An interesting feature of the 2X leveraged ETNs is that their leverage resets monthly rather than daily, which is the norm for most leveraged funds on the market. It is known that decay or slippage in leveraged funds will occur when the underlying index is volatile with no net change over a period of time. By resetting monthly rather than daily, this decay can be somewhat mitigated. An article by Seeking Alpha author Dane Van Domelen addresses the decay issue mathematically and shows that in most cases, the decay is not as serious as is often thought. However, this leverage does not come without costs. There is the management cost associated with providing the ETN, as well as a finance cost associated with maintaining the 2x leverage. Finally, it should be noted that investors in ETNs are subject to credit risk from the fund sponsor, in this case UBS. If UBS were to go bankrupt, the ETNs will likely become worthless. However, Professor Lance Brofman has argued that the risk of ETN investors losing money due to UBS going bankrupt is, barring an overnight collapse, minimal because the notes can always be redeemed at net asset value. I recently studied the performance of several of the 2x leveraged ETNs and found that, in general, the 2x ETNs fulfilled their objectives and also outperformed the corresponding (hypothetical) daily-reset 2x ETNs. This suggests that, over the last few years at least, that the 2x ETNs have been suitable (insofar as them being able to meet their objectives vis-a-vis their 1x counterparts) long-term instruments for the leverage-seeking investor. Just to make this point crystal clear, the 2x ETRACS ETNs have allowed aggressive investors to obtain 2x participation in a variety of asset classes in an efficient and stable manner – both to the upside and to the downside – I am not making specific recommendations as to whether the asset classes themselves (e.g. mREITs, MLPs, BDCs, and CEFs, just to name a few of the asset types covered by the ETRACS) are suitable as long-term investments. Building your own ETF In another article entitled ” Build Your Own Leveraged ETF “, Dane Van Domelen explores the possibility of combining leveraged ETFs with cash or other funds for various purposes. For example, Dane posited that a one-third ProShares UltraPro S&P 500 ETF (NYSEARCA: UPRO ), a 3x leveraged version of the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), two-thirds cash portfolio has virtually the same properties as a 100% S&P 500 portfolio (with periodic rebalancing), but allows you to hold a lot of cash: An interesting special case is where you put one-third of your money in UPRO and two-thirds in cash. At the onset, this portfolio would behave almost exactly as if you had all of your money in the S&P 500. UPRO’s expense ratio should result in somewhat diminished returns, but not much. And it might be worth it to free up two-thirds of your money, for emergencies and so forth. UBS 2x ETN expert Lance Brofman has also considered the same idea : If this hypothetical investor were thinking of either investing $1,000 of his $10,000 in the UBS ETRACS 2X Leveraged Long Wells Fargo Business Development Company ETN ( BDCL) and keeping $9,000 in the money market fund, or investing $2,000 of his $10,000 in the UBS ETRACS Wells Fargo Business Development Company ETN ( BDCS) and keeping $8,000 in the money market fund, either choice would entail the same amount of risk and potential capital gain. This is because BDCL, being 2X leveraged, would be expected to move either way twice as much as a basket of Business Development Companies, while BDCS would move in line with a basket of Business Development Companies. This article seeks to analyze whether it is possible to “build your own ETF” with the suite of UBS 2x leveraged ETNs, by applying the strategy described above by Dane Van Domelen and Lance Brofman. Interestingly, the analysis reveals the potential to add on additional yield to your portfolio. Considering fees The fee required to maintain the 2x leverage of the ETRACS 2x ETNs is based on the 3-month LIBOR, which currently stands at 0.33%. This is added to a variable financing spread (0.40-1.00%) to generate a total financing rate that is passed on to investors. This total financing rate of 0.77-1.33% is much lower than is available for all but the wealthiest of individual investors. Lance Brofman writes : Many retail investors cannot borrow at interest rates low enough to make buying BDCS on margin a better proposition than buying BDCL. This means that from an interest point of view, it would usually be better to buy the leveraged fund than to try and replicate it yourself with a margin loan from your broker. Applying the strategy However, what if the investor wasn’t interested in using leverage in the first place? Can he still make use of the low financing rates charged by the ETRACS 2x ETNs? To explore this, let’s try to apply the strategy described above by Dane Van Domelen and Lance Brofman, which basically entails replicating a 100% investment in a 1x fund with a 50% investment in the corresponding 2x fund and a 50% allocation to cash or a risk-free asset. The following illustrates such an example. Example Let’s say that you had $10K invested in the SPDR Dividend ETF (NYSEARCA: SDY ). SDY charges 0.35% in expenses, which comes out to $35 per year. You could replicate that investment with $5K in the UBS ETRACS Monthly Pay 2x Leveraged S&P Dividend ETN (NYSEARCA: SDYL ), leaving yourself with $5K in cash. SDYL charges 1.01% in total expenses, which on $5K comes out to $50.50. In other words, you’d be paying an extra $15.50 per year if you decided to invest $5K in SDYL compared to $10K in SDY. But wait! You have an extra $5K in cash left over. If you can use that $5K to earn $15.50 per year, corresponding to a rate of return [RR] of 0.31%, you can break even. With any higher rate of return, you would benefit from using the leveraged ETN and investing the rest of your cash. At first glance, it seems that 0.31% is a ridiculously low hurdle to surpass, suggesting that one would nearly always benefit from using the leveraged ETNs and investing the rest of the cash. However, one also needs to consider the risk of the invested cash portion. To mimic, as closely as possible, the risk of the original scenario (i.e. $10K invested in SDY), the $5K cash left over after investing $5K in SDYL should be invested in as risk-free of an asset as possible. Bankrate.com shows that 1.30% 1-year CDs and 1.25% savings accounts are currently available. These investments are insured by the FDIC, and can be considered to be nearly risk-free. Using the above example, investing $5K at 1.30% for one year yields you $65.00. After subtracting the additional $15.5 required for the additional expenses of SDYL ($50.50) vs. SDY ($35), you’d gain $49.50, or an additional 0.495%, from using this strategy! Results The following table shows a list of 2x leveraged ETNs, their corresponding 1x fund, and their respective total expense ratios [TER]. Also shown is the rate of return [RR] required on the risk-free portion to break-even, as well as additional yield that you would be able to obtain on the entire portfolio had the risk-free portion been left in cash paying 0%, a savings account paying 1.25% or a 1-year CD paying 1.30%. A negative number indicates that this strategy would lose money relative to investing the whole portion in the 1x fund. The funds are arranged in descending order of required RR on the risk-free portion. Please see my previous article if further information is required regarding these 2x ETNs. Note that some funds such as the ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN (NYSEARCA: HDLV ) and the ETRACS Monthly Pay 2xLeveraged U.S. Small Cap High Dividend ETN (NYSEARCA: SMHD ) so not have corresponding 1x counterparts, so are excluded from this analysis. Ticker TER Ticker TER Required RR Cash (0%) Savings (1.25%) 1-year CD (1.30%) ETRACS Monthly Pay 2xLeveraged MSCI US REIT Index ETN (NYSEARCA: LRET ) 1.96% Vanguard REIT Index ETF (NYSEARCA: VNQ ) 0.10% 1.76% -0.88% -0.26% -0.23% UBS ETRACS Monthly Reset 2xLeveraged S&P 500 total Return ETN (NYSEARCA: SPLX ) 1.56% SPY 0.09% 1.38% -0.69% -0.07% -0.04% ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (NYSEARCA: HOML ) 1.96% ETRACS ISE Exclusively Homebuilders ETN (NYSEARCA: HOMX ) 0.40% 1.16% -0.58% 0.05% 0.07% ETRACS 2xMonthly Leveraged S&P MLP Index ETN (NYSEARCA: MLPV ) 2.26% iPath S&P MLP ETN (NYSEARCA: IMLP ) 0.80% 0.66% -0.33% 0.30% 0.32% SDYL 1.01% SDY 0.35% 0.31% -0.16% 0.47% 0.50% UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN (NYSEARCA: MORL ) 1.11% Market Vectors Mortgage REIT Income ETF (NYSEARCA: MORT ) 0.41% 0.29% -0.15% 0.48% 0.51% UBS ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (NYSEARCA: DVYL ) 1.06% iShares Select Dividend ETF (NYSEARCA: DVY ) 0.39% 0.28% -0.14% 0.49% 0.51% UBS ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN (NYSEARCA: CEFL ) 1.21% YieldShares High Income ETF (NYSEARCA: YYY ) 0.50% 0.21% -0.11% 0.52% 0.55% UBS ETRACS Monthly Pay 2X Leveraged Dow Jones International Real Estate ETN (NYSEARCA: RWXL ) 1.31% SPDR Dow Jones International Real Estate ETF (NYSEARCA: RWX ) 0.59% 0.13% -0.07% 0.56% 0.59% UBS ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex – Energy ETN (NYSEARCA: LMLP ) 1.76% UBS ETRACS Wells Fargo MLP Ex-Energy ETN (NYSEARCA: FMLP ) 0.85% 0.06% -0.03% 0.60% 0.62% UBS ETRACS Monthly Pay 2xLeveraged Diversified High Income ETN (NYSEARCA: DVHL ) 1.56% UBS ETRACS Diversified High Income ETN (NYSEARCA: DVHI ) 0.84% -0.12% 0.06% 0.69% 0.71% UBS ETRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPL ) 1.16% UBS ETRACS Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPI ) 0.85% -0.54% 0.27% 0.90% 0.92% BDCL 1.16% BDCS 0.85% -0.54% 0.27% 0.90% 0.92% From the table above, we can see that the LRET/VNQ combination would be the worst pair to implement this strategy with, as it requires a 1.76% RR to break even. This means that even with a 1-year CD rate of 1.30%, you would be losing -0.23% using this method. This can be attributed to LRET’s exceptionally high expense ratio of 1.96%, and VNQ’s exceptionally low expense ratio of 0.10%, making it highly expensive to replicate 100% VNQ with 50% LRET. At the other end of the spectrum, the BDCL/BDCS combination appears to be the best pair for this strategy. The required RR is negative 0.54%, meaning that even if you left the 50% risk-free portion in cash, you would be gaining 0.27% on your overall portfolio. Investing the risk-free portion is a 1-year CD improves the performance of the portfolio by 0.92%. This can be attributed to BDCL’s below-average expense ratio of 1.16% and BDCS’ above-average expense ratio of 0.85%. The following chart shows the required RR for the 2x funds in order to implement this strategy. The following chart shows the additional yield that can be harvested by investing the 50% risk-free portion in cash (0%), a savings account (1.25%) or a 1-year CD (1.30%) for the respective 2x funds. Risks and limitations The 50% investment in a 2x fund may not correspond exactly to a 100% investment in 1x fund. It may do better or it may do worse. Periodic rebalancing may help, but this would entail additional transaction fees. In the case where the 1x fund is an ETF, you are additionally exposed to the credit risk of UBS when it is substituted for a 2x ETN (see introduction). In the case where the 1x fund is an ETF, the tax treatment may change when it is substituted for a 2x ETN. Savings accounts and CDs are only FDIC-insured up to a certain value (though if we’re worrying about this we have much bigger problems on our hands than the implementation of this strategy!). Conclusion A previous article showed that the ETRACS 2x ETNs did not inexorably decay in value even over several years, suggesting that the funds can function as efficient long-term investments for the leverage-seeking investor. This article shows that an investor not interested in leverage could still potentially benefit from the ETRACS 2x funds by “building his own ETF”. This simply costs of replicating a 100% investment in a 1x fund with a 50% investment in the corresponding 2x fund, and a 50% investment in a risk-free asset. Additional yields of up to 0.92% per year are available using this strategy. Further enhancements in yields can be achieved by investing the 50% into more risky assets such as corporate bonds, although this alters the overall risk-reward dynamics of the strategy.

Fidelity Magellan Fund: Getting Better In A Good Market And Coasting On Past Successes

FMAGX is a storied name in the world of mutual funds. But the fund hasn’t been what it once was in a long time. It’s hardly a bad fund, and it may be turning itself around, but there may also be better options for you. The Fidelity Magellan Fund (MUTF: FMAGX ) has a hallowed place in the history of mutual funds. Former manager and mutual fund icon Peter Lynch is probably the name most associated with the fund. And while he led it to great success, he hasn’t been the manager for a long time… and performance has been less than inspiring for a long time, too. What’s it do? Fidelity Magellan’s objective is capital appreciation. It achieves this by investing in stocks. That may sound a bit simple, but that’s really what Fidelity puts out there. What this is basically explaining is that the fund owns stocks and doesn’t have specific style, region, or sector preferences. So it will own both growth and value names, invest in domestic and foreign stocks, and basically go where it thinks it can find opportunity. With an asset base of around $15 billion, however, you’ll want to keep in mind that it isn’t likely investing in too many small companies. So FMAGX is really a large cap style agnostic stock fund. Current manager Jeffrey Feingold is looking for companies with, “…accelerating earnings, improving fundamentals and a low valuation.” He believes these are the main drivers of performance, but admits that finding all three in one investment can be hard. So he works to find stocks with at least two of these factors going for them. Broadly speaking he also tries to diversify the holdings across aspects like type of company (fast growers, higher-quality growers, and cheap with improving fundamentals) and risk profile (for example, stocks with different leverage levels and earnings predictably). In the end, he explains, “…because of the way I manage the fund, security selection is typically going to be the primary driver of the fund’s performance relative to its benchmark.” How’s it done? Feingold has been at the helm of the fund since late 2011, putting his tenure at a little over three years. And in that span he’s proven pretty capable. For example, over the trailing three year period through August, the fund’s annualized total return was roughly 16.4%. The S&P 500’s annualized total return over that span was 14.3%. Assuming there was a bit of a transition period as he took over, that three period is probably a fair time frame over which to look at his performance. And its a big difference from longer periods. Despite the recent solid showing, the fund’s five-, 10-, and 15-year trailing returns all lag the index and similarly managed funds. Often by wide margins. So Feingold has been doing something right at a fund that’s been missing the mark for some time. However, there’s more to the story. The manager’s tenure has coincided with a mostly positive market. In fact, 2012 (the S&P advanced around 16%), 2013 (the S&P was up 32%), and 2014 (the S&P was up nearly 14%) were all fairly good for the market based on historical average returns. In other words, the manager has had a good backdrop in which to work. Looking to the future, however, it’s fair to say that he hasn’t been stress tested at this fund yet. So I wouldn’t get too excited by the recent performance. That said, so far this year, the fund has held up reasonably well. It’s lost less than the S&P and similarly managed funds. But I’d argue that this isn’t enough of a test to get a real feel for how the fund will handle a major market correction with Feingold at the helm. But it is at least encouraging. Not too expensive, lots of trading Looking a little closer at owning Fidelity Magellan, it’s got a reasonable expense ratio of 0.7%. Although you could argue that a fund with around $15 billion in assets could probably be run with a lower expense ratio, 70 basis points isn’t out of line with the broader fund industry. If you take the time to look at the fund’s annual report, though, you’ll notice that expenses have increased from around 0.5% in the last couple of fiscal years. But that’s really a statement to the improving performance. Magellan’s expense ratio is based on the cost of running the fund plus a performance adjustment. In other words, the expense ratio is going up because Magellan has been doing better. I think most would agree that this is reasonable. That said, Magellan’s 70% turnover looks fairly high to me based on the large cap names it’s pretty much forced into because of its large asset base. That number has been fairly constant over the manager’s tenure, as well, so this looks like a reasonable rate to expect year in and year out. There are a number of very good funds that manage to do well with turnovers in the 20% range, so the 70% figure is something I’d watch. For example, that level of trading in a falling market, as noted above, has yet to be tested at the fund. I make that comparison because a fund with a 20% turnover is clearly buying and holding companies it likes and knows well. Companies that it believes have solid long-term prospects. A fund that turns over 70% of its holdings in a year looks like it’s investing with a shorter time period in mind. You may be OK with that, but if you aren’t, then this may not be the right fund for you. If you’ve gone for the ride… Investors often buy funds and then forget they own them. If you have been in FMAGX for a long time it has probably served you reasonably well, overall. That said, you have also lived through some periods where management hasn’t lived up to the fund’s storied past. That appears to be turning a corner with a new manager running the show. However, the new manager has so far been running things in a good market. There are few solid clues as to what you might expect in a real downdraft. So improved performance is nice to see, but it’s too early to call an all clear-especially with the market turning so turbulent of late. In fact, Feingold might be on the verge of a true test of his abilities in a falling market. Only time will tell. In the end, if you own Magellan I wouldn’t be rushing for the exits. However, if complacency is what’s kept you in the fund I’d suggest looking around at other large cap funds. Magellan is hardly a stand out performer, despite the fund’s impressive history, and based on the management changes over time it may no longer be the fund you bought. So a little perspective on your options wouldn’t hurt, even if you decide to stick around.

Where Are The Best Opportunities In Preferred Shares?

Preferred shares belong in every income portfolio. My preference is to use closed-end funds for a preferred shares allocation. In this article I survey all closed-end funds that cover this category with emphasis on identifying leading candidates. Every income portfolio needs an allocation to preferred shares. It will come as no surprise to regular readers when I say I prefer to get mine from CEFs (closed-end funds). It’s my view that there are two areas where CEFs excel relative to competing instruments. One is in the tax-free, municipal bond category and the other is preferred shares. In this article I look at the range of offerings in preferred shares CEFs. There are 16 preferred shares funds listed on cefconnect . Funds Market Cap ($M) Cohen & Steers Ltd Duration Preferred & Income Fund, Inc. (NYSE: LDP ) $663.35 Cohen & Steers Select Preferred & Income Fund, Inc. (NYSE: PSF ) $280.60 Flaherty & Crumrine Dynamic Preferred & Income Fund Inc (NYSE: DFP ) $428.16 Flaherty & Crumrine Preferred Securities Income Fund Inc (NYSE: FFC ) $806.35 Flaherty & Crumrine Total Return Fund Inc (NYSE: FLC ) $185.10 Flaherty & Crumrine Preferred Income Fund Inc (NYSE: PFD ) $139.80 Flaherty & Crumrine Preferred Income Opportunity Fund Inc (NYSE: PFO ) $127.24 First Trust Intermediate Duration Preferred & Income Fund (NYSE: FPF ) $1,315.02 John Hancock Preferred Income Fund Ii (NYSE: HPF ) $405.14 John Hancock Preferred Income Fund (NYSE: HPI ) $502.51 John Hancock Preferred Income Fund Iii (NYSE: HPS ) $529.13 John Hancock Premium Dividend Fund (NYSE: PDT ) $630.31 Nuveen Quality Preferred Income Fund 3 (NYSE: JHP ) $195.68 Nuveen Preferred Income Opportunities Fund (NYSE: JPC ) $878.56 Nuveen Quality Preferred Income Fund 2 (NYSE: JPS ) $1,089.51 Nuveen Quality Preferred Income Fund (NYSE: JTP ) $525.58 CEFs offer powerful advantages in the preferred shares space. First there is leverage. Ok, I know I just wrote an article questioning the value of leverage ( Is Leverage Really an Advantage in Equity Closed End-Funds? ) but the key word in that title is “equity.” Of course preferred shares do fall under the rubric of equity investments, but in my mind they skirt the line between fixed-income and equity, pushing more toward the fixed-income side. So, here I do consider leverage an advantage. And in any case, there is no choice; all 16 preferred shares CEFs are leveraged within a fairly tight range. Effective leverage varies from 28.65% to 33.92%. The median is 33.59%, so the distribution is clearly top heavy as this distribution chart shows. A second advantage is skilled management. This comes at a cost; these funds average 1.7% fees, about a quarter of which is interest cost for leverage. In this category, as in many of the fixed-income categories, managers have tools available that most individuals do not. Leverage is one of them. Another is the ability to use hedging strategies in response to significant increases in long-term interest rates. And a third is access to credit information along with the quantitative tools to use that information to an investor’s best advantage. And a final factor is the opportunity to purchase CEFs at a discount, something not generally possible in other investment vehicles. Every one of these 16 CEFs is priced at a discount. These advantages combine to generate income appreciably greater than a comparable portfolio of preferred shares an individual can assemble, or that one obtains from ETFs. To support that generalization, I preset these data comparing the median CEF to iShares U.S. Preferred Stock ETF (NYSEARCA: PFF ) and Preferred Portfolio ( PGX ), the two largest ETFs in the category. Fund Yield PFF 6.13% PGX 6.01% CEF minimum 7.69% CEF median 8.64% CEF maximum 9.01% The median yielding CEF is outpacing PFF by 41% and PGX by 44%. The difference cannot be accounted for by the 33% leverage alone. Management priorities, driven by investor priorities, are a part of the mix; this may show up in CEFs having higher levels of credit risk, for example, as management caters a fund to appeal to investors willing to accept that risk for the higher yields it can bring. Another important factor is premium/discount status. Large premiums and discounts are part of the nature of CEFs, but not a factor in ETFs or open-end mutual funds. The importance of discount shows up in enhanced yields. The median fund’s yield on NAV is 7.82%, well below the median yield at market seen in the table (8.64%). It is the median discount of -9.03% that gets the additional 82 basis point of yield into the investor’s pocket. Of course, the median yielding and the median discounted fund are not necessarily the same fund, I’m just making a point here and using median values to illustrate it. One can readily do the math for individual funds. So what are the yields of our 16 preferred shares CEFs? Here we have yield at market, and yield on NAV. How do funds find their market price levels relative to their NAVs? Obviously there are multiple complex factors, but among the most important is the tendency for the market to drive yields to an equilibrium level via discounts or premiums. This can be seen graphically in the next chart where discount is plotted against distribution on NAV. This trend is seen in every category of CEFs I’ve looked at. There are exceptions, of course, but in general lower NAV yields produce deeper discounts. FFC with the highest NAV yield is the least discounted fund. In fact, discount territory is a relatively unaccustomed place for FFC to find itself in. When I last wrote about preferreds a year ago ( This Fund May Be Your Best Call for Preferred Shares ), I opined that FFC at a discount was a smart buy. That discount was nearly the same as today’s. I continue to feel that way and certainly consider it attractive at its present level. If we accept the tendency to move toward NAV Distribution/Discount equilibrium, the best values should be found among the funds below the trend line. Eliot Mintz had discussed this in relation to tax-free muni-bond CEFs ( Municpal Bond Closed End Funds – How to Find the Best Values ). By this criterion, FPF, JPC, the John Hancock Funds (HPS, HPI and HPF) and PSF merit a close look. A second aspect of CEFs that has a tendency to revert to mean values is Premium/Discount status. This tendency is well documented in the academic research on the subject and can provide a source of alpha. This is measured by Z-Scores. More negative Z-Scores indicates current prices are more discounted than the mean premium/discount. Sometimes one can find buying opportunities among funds that have deeply negative Z-scores. They are also useful in providing an overall picture of trends in a category over time. Here’s how the 16 funds fare for this metric. PDT and PSF are much more discounted today than their 3-, 6- or 12-month means by large margins. FPF, which looked interesting from the Distribution/Discount analysis, has been reducing its discount steadily and now stands about one standard deviation form its three-month mean. The John Hancock funds (HPF, HPI, HPS) show appealing Z-Scores indicating again that they could merit our attention. This report is intended as a broad survey of the preferred shares CEF category. I will be following up with a closer look at the funds that look most attractive in the next installment. We’ll look at management strategies, portfolio quality, sustainability of distributions and other factors that go into choosing a fund. Among my “best bets” that I’ll be covering are FFC, which I consider the best of the field but possibly not a buy at this time; FPF; and the John Hancock funds. Meanwhile I and other readers would certainly appreciate hearing from readers regarding their opinions on the subject of preferred shares funds.