Morningstar, Inc. Commentaries
Feb 7, 2014
Click here to access A Closer Look at Preferred-Stock Funds
On Nov. 4, 2013, Morningstar launched the preferred-stock category. This Morningstar Category includes funds with a majority of assets invested in preferred stock over a three-year period. For an overview of preferred stock and the new category, refer to this article.
Preferred stocks were off to a decent start at the beginning of 2013, but took a hit after the Federal Reserve's taper talk in May. Because most preferred securities are long term (often perpetual in nature), prices dropped dramatically as long-term interest rates jumped. Adding fuel to the fire, soon after its taper talk the Fed released finalized rules on bank capital requirements relating to the treatment of certain preferred shares, which took a toll on preferred-share prices.