Cohen & Steers Select Preferred & Income Fund, Inc. (PSF)

Cohen & Steers Select Preferred and Income Fund, Inc. is a closed-end fund that pools capital from shareholders to invest in a diversified portfolio of preferred stocks, hybrid-preferred securities, and corporate debt. Unlike open-end funds, which allow investors to buy and sell shares directly from the fund at daily net asset value, Cohen & Steers Select maintains a fixed number of shares that trade on public exchanges at market-determined prices — meaning shares may trade at a premium to or discount from their underlying net asset value. The fund uses structural leverage as a deliberate tool to amplify the income its portfolio generates, operating within regulatory guardrails set by the Investment Company Act of 1940.

The preferred securities strategy

At its core, the fund invests at least 80% of its managed assets in a global portfolio of preferred and income securities. Preferred stock is a hybrid security that sits between bonds and common equity: it carries no voting rights, but it entitles the holder to receive dividends that rank senior to common-stock dividends. Traditional preferred securities issued by banks, utilities, and industrial companies form the anchor of the portfolio. Alongside these sit hybrid-preferred instruments — securities that combine equity and debt features and offer higher yields in exchange for additional risk — and floating-rate preferred shares whose dividends adjust with market interest rates, providing some protection against rising-rate environments.

The fund also holds a smaller allocation to investment-grade corporate bonds and convertible securities with ten-year or longer maturities. These extend duration and add flexibility to respond to both market dislocations and opportunities as credit spreads widen or tighten. The global mandate allows the manager to invest in preferred and debt issued outside the United States, broadening the universe and capturing currency and geopolitical diversity.

Leverage as amplification

The distinguishing feature of the fund is its deliberate use of leverage. Under Section 18 of the Investment Company Act of 1940, a closed-end fund may borrow money or issue debt and preferred shares so long as certain asset-coverage ratios are maintained. Cohen & Steers Select is permitted to employ leverage of up to 33% of its managed assets — meaning for every dollar of levered capital, it must hold at least three dollars of total assets. In practice, leverage means the fund borrows at shorter-term rates and invests the proceeds in longer-maturity, higher-yielding securities, generating a net interest margin. When that spread holds wide, leverage amplifies return. When it narrows, leverage amplifies loss.

This mechanism is transparent in the fund’s reporting and exists because leverage is a regulatory option, not a loophole. The Investment Company Act explicitly allows closed-end funds to use it under prescribed safeguards; by contrast, open-end mutual funds cannot employ leverage without triggering separate SEC restrictions.

Income distribution and market dynamics

The fund targets regular distributions to shareholders. Because closed-end funds trade on exchanges, their shares often oscillate between trading at a discount to and a premium to net asset value — meaning investors can buy the securities at a bargain-basement price relative to the underlying portfolio, or overpay for the same portfolio depending on market sentiment. That trading discount or premium affects the effective yield an investor receives when they buy. A fund trading at a 5% discount to NAV offers a 5% built-in return if the discount eventually closes; a premium works in reverse.

Market dislocations in fixed income — widening credit spreads, falling preferred-stock valuations, rising interest rates — create periods when closed-end funds, including PSF, trade at steep discounts. Those moments can make the fund attractive to buyers, but they also create pressure on the fund’s leverage metrics, since the value of assets underlying each dollar of debt may fall, approaching the regulatory floor.

Regulatory structure and operating environment

Cohen & Steers Select operates as a registered investment company under the Investment Company Act of 1940. That law sets minimum standards for disclosures, restricts transactions with insiders, limits leverage, and requires the fund to file regular reports with the Securities and Exchange Commission including detailed portfolio holdings, expense ratios, and performance data. The fund’s board of directors includes independent directors required by law to oversee manager conflicts and fiduciary duties.

The fixed-income market in which the fund invests is itself shaped by Federal Reserve policy, credit conditions, and the willingness of banks and corporations to issue new preferred and debt securities. Persistent low interest rates incentivize issuance and support valuations; rising rates compress values and can freeze issuance. Because preferred stocks have no maturity date, they behave more like equities than bonds in a rising-rate environment — falling sharply in value as the discount rate rises. The fund’s ability to deliver returns depends not just on defaults within its portfolio but on the broader direction of credit spreads and interest rates, both variables the manager cannot control.

How to research PSF as an investment

Prospective investors should begin with the fund’s annual report filed with the SEC (CIK 0001498612), which discloses current portfolio holdings, asset allocation, the expense ratio, leverage details, and distribution history. The fund’s website, maintained by Cohen & Steers, typically includes fact sheets, performance data, and distribution schedules. When evaluating a closed-end fund, pay attention to the current discount or premium to net asset value, the leverage level relative to its maximum allowed, the trend in credit spreads (which affect preferred-stock valuations), and the fund’s distribution history relative to its underlying asset value — distributions that exceed net investment income signal that the fund is returning capital to shareholders, unsustainable in downturns. As always, past performance is not a guarantee of future results.