Horizons ETFs Management (Canada) Inc. Wednesday announced the launch of the Horizons Active Floating Rate Preferred Share ETF, which will for the first time give Canadian investors the opportunity to gain floating rate exposure from North American preferred shares through an exchange traded fund.

Class E units and Advisor Class units of the HFP will began trading today on the Toronto Stock Exchange (TSX:HFP and TSX:HFP.A).

The new fund will seek to generate income consistent with prevailing short-term preferred share yields while stabilizing its market value from the effects of interest rate fluctuations. It will invest primarily in the preferred shares of Canadian companies. It may also invest, to a lesser extent, in the preferred shares of companies located in the United States, as well as the fixed-income securities of Canadian and U.S. issuers, including other income-generating securities and exchange traded funds.

HFP will generally maintain a portfolio duration of less than two years. Duration is generally used to gauge the interest rate sensitivity of a fixed-income security that has a maturity, call or reset date. Typically, the longer the duration of such a security, the more sensitive its market price will be to interest rate fluctuations.

“Preferred shares have demonstrated that their prices can be just as sensitive to interest rate fluctuations as bond prices, as we saw in June of this year, when a slight rise in rates caused a sharp decline in the market prices of many preferred shares,” explains Howard Atkinson, president of Horizons ETFs.

“We feel it’s important to bring to the market an ETF that can offer a floating rate of income and a much lower risk profile than other options available to Canadian preferred share investors.”

HFP will be sub-advised by Montreal-based Fiera Capital Corp. one of the largest preferred share managers in Canada. It will be overseen by the same portfolio management team that sub-advises the Horizons Active Floating Rate Bond ETF (HFR:TSX) and the Horizons Active Preferred Share ETF (HPR:TSX).

“HFR, our floating rate bond ETF, has attracted more than $200 million in assets over the last 12 months, which we attribute to growing concerns over interest rates, as well as to Fiera’s excellent performance track record,” says Atkinson. “HFP will offer a similar floating rate approach to preferred shares combined with the exceptional preferred share management capabilities of Fiera.”