(VRP) Variable Rate Preferred - Overview

The Invesco Variable Rate Preferred ETF (VRP) seeks to track a market-cap-weighted index that reflects the performance of U.S. dollar-denominated floating-rate preferred shares and certain hybrid securities, spanning both investment-grade and below-investment-grade issuers. The fund commits at least 90 % of its assets to the index constituents (including ADRs that mirror those securities), and it is classified as a non-diversified ETF, meaning concentration risk can be material.

Key market drivers for VRP include the prevailing Federal Reserve policy stance and the shape of the yield curve: because the underlying preferreds have variable coupons, the fund’s income is more sensitive to short-term rate changes than to long-term rates. As of the latest data (Q4 2025), the ETF’s weighted average coupon is roughly 5.2 % and its effective duration is about 0.8 years, indicating limited price volatility but a direct pass-through of rate hikes to distribution yields.

Credit quality is another critical factor. The index’s composition tilts toward lower-rated issuers (approximately 35 % below investment grade), which can amplify spread risk during periods of tightening credit conditions. Monitoring the high-yield preferred spread (currently near 250 bps over Treasuries) can provide an early signal of stress in this segment.

Given VRP’s exposure to interest-rate dynamics and credit spreads, investors should assess their tolerance for concentration risk and the potential impact of a rising rate environment before allocating capital.

For a deeper, data-driven look at how VRP fits within a broader portfolio strategy, you might explore ValueRay’s analytical tools for preferred-stock ETFs.