Quarterly Commentary - Preferred Stock

MARKET OVERVIEW

Returns for preferred stocks outpaced their fixed income counterparts in the third quarter of 2024. During the quarter, the Virtus InfraCap US Preferred Stock ETF gained 11.06%, while passively-managed preferred stock ETFs averaged a return of 7.43%. Both of these returned more than Investment Grade, Municipal, and High Yield Bonds, which returned 5.84%, 2.71%, and 5.28%, respectively.

We continue to see that preferred yields are trending higher than the long-term average, while that gap has compressed year-to-date.

ASSET CLASS PERFORMANCE	NEW ISSUANCE ($BN)

ASSET CLASS PERFORMANCE

MARKET OUTLOOK

The market has effectively reduced rates for the Federal Reserve, with a 100 basis point decline in the 10-year interest rate over the past six months, stabilizing the housing market. We anticipate economic growth of 2-3% this year, indicating a "No Landing" scenario. We follow the "Hatfield Rule," which uses housing starts as a leading indicator of recessions. The recent increase in housing starts to 1.35 million units supports our view that a recession is not imminent.

The recent rate decline underscores our belief that global monetary policy significantly influences rates more than Federal fiscal policy. Given the absence of recession indicators and only moderate growth, a 50 basis point cut by the Fed this year is unlikely. The initial cut reflects an acknowledgment of a policy error by not reducing rates in July, marking a shift towards more flexible decision-making for the first time in four years.

THE NEW ISSUE MARKET PRESENTS OPPORTUNITIES

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Within the past two years, new issues preferred stocks have appreciated 3.23% on average after issuance and over 86% of new issues have traded up. As we enter a lower rate environment, we anticipate issuers to refinance outstanding preferreds. There is over $17bn of preferreds that will become callable in 2024 and 2025 that is currently trading above par

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The Market Overview and Outlook discussed here have been prepared using sources of information generally believed to be reliable; however, their accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice. Individual new issued tickers are displayed to reflect price trend data as group for 2024. The data is not intended to be an endorsement or investment advice for any specific company, issuer, or preferred stock new issue; the data displayed is limited to new issued preferred parity securities for 2024. Please reach out to us to obtain more information regarding the underlying data New Issuance data from 09/30/2022 to 9/30/2024. New issuance includes primary issuance of $25 par preferred or debt with greater than $50,000,000 initial issuance size. Price return is defined as the price of the security as of 9/30/2024 divided by its respective par amount less  1. Average is a simple average calculation across the universe. PFFA may participate in many of these new issued securities, however new issued preferred securities may not fit the investment mandate or Infrastructure Capital may choose not to participate for various investment reasons (i.e., portfolio capacity, risk, total return); nonetheless, this trend data is not intended to be reflection of performance or any attribution to PFFA's performance in any way; rather the chart is showing trend and market data for new issued preferred stocks in a falling interest rate environment. See IMPORTANT ADDITIONAL INFORMATION for disclosures, definitions, and indices used

Virtus InfraCap U.S. Preferred Stock ETF Performance

(09/30/2024)

	QTD	YTD	1 Year	3 Year	5 Year	10 Year	Inception (05/15/2018)
PFFA NAV	11.18	19.25	29.89	6.62	6.84	N/A	8.11
PFFA MKT Price	11.18	18.44	30.05	6.87	6.89	N/A	8.17
Index	6.94	12.17	18.89	1.01	3.70	N/A	4.65

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit virtus.com for performance data current to the most recent month end.

NAV returns are calculated using the Fund’s daily 4:00 p.m. NAV, and include the reinvestment of all dividends and other distributions (reinvested at the Fund's NAV on distribution ex-date). Market price returns are calculated using the 4:00 pm midpoint between the bid and offer, and include the reinvestment of all dividends and other distributions (reinvested at the 4:00pm bid/offer midpoint on distribution ex-date). Market price returns do not represent the return you would receive if you traded at other times. Benchmark: The S&P U.S. Preferred Stock Index is designed to measure the performance of the U.S. preferred stock market. Preferred stocks pay dividends at a specified rate and receive preference over common stocks in terms of dividend payments and liquidation of assets. The index is unmanaged, its returns do not reflect any fees, expenses or sales changes, and is not available for direct investment.  Fees & Expenses: The Gross Expense Ratio for the Fund is 2.52%. The Expense Ratio represents the fund’s Total Annual Fund Operating Expenses, which includes a management fee, structured as a unified fee, out of which the Fund’s subadviser pays all routine expenses, except for certain payments as described in the prospectus, which are paid by the Fund.

Investors should consider each Fund’s investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the Fund, please click here. Please read the prospectus carefully before investing.Exchange-Traded Funds (ETF): The value of an ETF may be more volatile than the underlying portfolio of securities it is designed to track. The costs to the portfolio of owning shares of an ETF may exceed the cost of investing directly in the underlying securities. Preferred Stocks: Preferred stocks may decline in price, fail to pay dividends, or be illiquid. Leverage: When the Fund leverages its portfolio, the Fund may be less liquid and/or may liquidate positions at an unfavorable time, and the value of the Fund’s shares will be more volatile and sensitive to market movements. Non-Diversified: The portfolio is not diversified and may be more susceptible to factors negatively impacting its holdings to the extent the portfolio invests more of its assets in the securities of fewer issuers than would a diversified portfolio. Market Price/NAV: At the time of purchase and/or sale, an investor’s shares may have a market price that is above or below the fund’s NAV, which may increase the investor’s risk of loss. Market Volatility: The value of the securities in the portfolio may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio’s manager(s) to invest its assets as intended. Prospectus: For additional information on risks, please see the fund’s prospectus. ETFs distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc.

About Us:

Infrastructure Capital Advisors, LLC (ICA) is an SEC-registered investment advisor that manages exchange traded funds (ETFs) and a series of hedge funds. The firm was formed in 2012 and is based in New York City. ICA seeks current income opportunities as a primary objective in most, but not all, of ICA's investing activities.

Additional Disclosure Information

The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. This information does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment including any products or services or an invitation, offer or solicitation to engage in any investment activity. This article is not an offer to sell, or solicitation of an offer to buy any investment product or services offered by Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law.  Infrastructure Capital Advisors, LLC nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. This data includes information based on data and calculations sourced from Bloomberg and third-party sources. We believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information in this article. The preferred market place information and comparative active and passive management information is provided for informational purposes only, actual funds and indices may have different characteristics and risks which are not presented. Many of the assumptions in this illustration reflect our subjective belief and is subject to change without notice. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.  Additionally, any projections, market outlooks and estimates included herein are based upon certain assumptions, including but not limited to the prior experience of ICA and other factors it deems relevant such as current and expected market conditions These materials are provided for informational purposes only.

Index Data and Terminology:  Virtus InfraCap US Preferred Stock ETF: PFFA, Passive Preferred ETFs: Category average of preferred stock funds on Bloomberg, using a simple average of each fund’s respective total return for the period;  Investment Grade: Bloomberg U.S. Corporate Investment Grade (LUACTRUU Index). Municipal Bonds: Bloomberg Municipal Bond Index (LMBITR Index).  High Yield Bonds: Bloomberg U.S. Corporate High Yield Index (LF98TRUU Index). There are limitations when comparing an index, LUACTRUU, LMBITR, or LF98TRUU, to a Fund, PFFA.  From Bloomberg: Virtus InfraCap US Preferrred Stock ETF:  Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.  Yield Comparison: There are limitations when comparing an index, such as SPPREF, to a Fund, PFFA. Yields: Yield information displayed in the chart is calculated based on Bloomberg data as of 09/30/2024. Yield information for the InfraCap US Preferred ETF or Index is based on Bloomberg’s Dividend Indicated Yield, which is the most recently announced gross dividend, annualized based on the dividend frequency, then divided by the current market price.  The prior application of leverage does not guarantee future application of leverage.  When a portfolio is leveraged, the value of its securities may be more volatile and all other risks may be compounded.  Please reach out to us to obtain more information regarding the underlying data. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown.

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the Fund, please click here. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or InfraCap, please reach out to Craig Starr at 212-763-8336 (Craig.Starr@icmllc.com).

A word about risk:  Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in equities securities, dividend paying securities, utilities, small-, mid- and large-capitalization companies, real estate investment trusts, master limited partnerships, foreign investments and emerging, debt securities, depositary receipts, market events, operational, high portfolio turnover, trading issues, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Small and Medium-capitalization companies, foreign investments and high yielding equity and debt securities may be subject to elevated risks. The Fund is a recently organized investment company with no operating history. Please see prospectus for discussion of risks. Diversification cannot assure a profit or protect against loss in a down market.  SCAP and ICAP are distributed by Quasar Distributors, LLC.