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Morningstar, Inc. Commentaries

A Closer Look at Preferred-Stock Funds

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.

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Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individuals, financial advisors, and institutions.

Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services and has approximately $195 billion in assets under advisement or management as of Sept. 30, 2012. We have operations in 27 countries.