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Flaherty & Crumrine Preferred and Income Fund
Flaherty & Crumrine launched the Preferred and Income Fund in 1991 as a dedicated vehicle for preferred securities, a hybrid asset class that sits between...
Flaherty & Crumrine Preferred and Income Fund
Flaherty & Crumrine launched the Preferred and Income Fund in 1991 as a dedicated vehicle for preferred securities, a hybrid asset class that sits between senior debt and common equity in the capital structure. The fund is managed by Flaherty & Crumrine Incorporated, a Pasadena-based investment adviser that has specialized exclusively in preferred and income-producing securities since its founding in 1983. The founding principals, Robert Flaherty and Donald Crumrine, built the firm around a thesis that preferred stocks offer a structural yield advantage over comparable investment-grade bonds with manageable incremental credit risk. The fund's strategy concentrates on fixed-rate and floating-rate preferred securities, trust-preferreds, and contingent-capital instruments issued predominantly by large-cap financial institutions, insurance companies, and regulated utilities. Portfolio holdings skew heavily toward US-based issuers, with select exposure to European banks such as Barclays and HSBC that issue USD-denominated preferred instruments. The fund operates as a traditional closed-end vehicle listed on the New York Stock Exchange, employing leverage through the issuance of auction-rate preferred shares and credit facilities to amplify distributable income — a structure that can magnify both yield and net-asset-value volatility. The management team operates from Pasadena, with R. Eric Chadwick serving as President of the fund and Donald Crumrine as Chairman. The adviser employs a bottom-up credit research process focused on call-protection features, dividend coverage ratios, and regulatory-capital implications of each issuance. In September 2023, the fund maintained its monthly distribution of $0.046 per share, part of an uninterrupted distribution track record spanning over two decades (per CEF Connect, 2023). Flaherty & Crumrine's franchise also includes three other listed preferred-stock closed-end funds: the Flaherty & Crumrine Preferred Securities Income Fund, Flaherty & Crumrine Dynamic Preferred and Income Fund, and Flaherty & Crumrine Total Return Fund. Flaherty & Crumrine's structural differentiator is pure single-strategy focus across a four-decade arc. Unlike diversified asset managers that add preferred-stock allocation as a niche sleeve alongside high-yield, leveraged-loan, and core-fixed-income mandates, Flaherty & Crumrine has no product beyond preferred and contingent-capital securities. This concentrated specialization means the firm's credit-research team sees virtually every new preferred issuance, giving it a persistent information advantage in a security type that most multi-asset managers cover with a single junior analyst.
General information
Firm type
Asset Manager
Year founded
1991
AUM
Undisclosed
Location
Region
North America
Country
United States
City
Pasadena
Corporate office
Pasadena, CA, United States
Principals
R. Eric Chadwick
President
Donald F. Crumrine
Chairman
Robert F. Flaherty
Portfolio Manager
Sector focus
Frequently asked questions
Who runs investment decisions at Flaherty & Crumrine Preferred and Income Fund?
The fund is managed by Flaherty & Crumrine Incorporated, a Pasadena-based specialist in preferred securities. R. Eric Chadwick serves as President of the fund, while co-founders Donald Crumrine and Robert Flaherty remain actively involved as Chairman and Portfolio Manager. The firm has no other lines of business — the entire investment team is dedicated to analyzing preferred-stock and contingent-capital securities.
What distinguishes a closed-end fund structure for preferred stocks from an open-end mutual fund?
A closed-end structure allows the fund to remain fully invested in less-liquid preferred securities without having to maintain cash buffers for redemptions, since shares are bought and sold on an exchange rather than redeemed directly with the fund. The fund can also employ leverage — which it does through auction-rate preferred shares — to enhance distributable income. This means the income stream is more stable month to month, but the market price of the fund's shares can trade at a premium or discount to net asset value.
Which sectors does the fund avoid entirely?
The fund concentrates almost entirely on financials — banks, insurance companies, and broker-dealers — and regulated utilities. It generally avoids preferreds from non-financial corporate issuers, REITs, and energy companies, since those sectors' preferred offerings tend to be rated below the fund's investment-grade credit floor.
How does the fund use leverage, and what are the risks?
The fund employs leverage through the issuance of preferred shares and credit facilities, which provide additional capital to invest in higher-yielding preferred securities and amplify the spread. The primary risk is that rising short-term borrowing costs compress net income if the fund's leverage is floating-rate while its assets are fixed-rate, squeezing distributable income. The fund's public filings disclose its structural leverage levels quarterly.
Is this fund appropriate for allocators seeking equity-like diversification?
No — this fund is a deeply concentrated bet on the capital structures of financial institutions and utilities. It offers equity-like volatility without equity-like upside participation, because preferred dividends are fixed. Allocators should treat it as a specialized income sleeve, not a diversifier alongside broad equity or high-yield bond mandates.
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