- Last Ratings Update:07/31/2014
- Price as of 07/31/2014 :$19.00
- Net Assets:$797.25 Million
- Peer Rank:151 of 280
- Investment Rating:B-
We rate Flaherty & Crumrine Pref Sec Inc at B-. This overall rating indicates it is among the top 10% of all closed end funds in its peer group. Positive factors that influence this rating include a greater than above average total return, low price volatility and low expense structure. The fund invests approximately 4% of its assets in bonds and may be considered for investors seeking an Equity Income strategy.
POSITIVES AND RISKS
Total return ranks above peers over the last three years. The Flaherty & Crumrine Pref Sec Inc has returned an annual rate of 7.86% since inception. More recently, the fund has generated a total return of 20.87% in the last five years, 14.43% in the last three years, and 13.09% in the last year. How does that compare to other equity funds? In the last five years, it has outperformed 93% of them. It has also outpaced 68% of its competitors on a three year basis and 60% of them over the last year for the period ending 7/31/2014. On a year to date basis, FFC has returned 14.62%.
Downside risk has been below average. FFC has a draw down risk of -18.41%, which is the largest price decline experienced over the last three years. This fund has a three year standard deviation of 13.6%. This fund has had moderate volatility in its monthly performance over the last 36 months. As of 7/31/2014, the fund was trading at a price of $19.00, which is 4.2% below its 52-week high of $19.83 and 0.3% above its 52-week low of $18.94.
High expense ratio hinders performance. On total assets of $797.25 million, FFC maintains a high expense ratio compared to its Equity Income peers of 1.44% to cover all operating costs. Brokerage costs for the fund to buy and sell shares are not included in the expense ratio. As FFC is a closed end fund, it has no front end or back end load.
Manager tenure and performance record are net positives. Substandard fund managers tend to be replaced, so a long tenure is usually a good sign that a fund is achieving its objectives. The Flaherty & Crumrine Pref Sec Inc has been managed by Robert E. Chadwick for the last 12 years. Over that period, the manager was able to capture more actual gains in excess of the expected return than 88% of other fund managers.
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