The History Of Cohen & Steers Select Preferred and Income Fund, Inc. (NYSE:PSF)

The History Of Cohen & Steers Select Preferred and Income Fund, Inc. (PSF)

Published April 2nd 2025, 2:09 AM EDT

Cohen & Steers Select Preferred and Income Fund, Inc. (NYSE: PSF) has built a reputation as one of the enduring investment vehicles in the realm of closed-end funds focused on income generation. Its evolution reflects broader trends in the financial markets—from the growth of alternative income strategies to the dynamic demands of investors in a continuously changing economic landscape. This article provides a comprehensive look at the long and detailed history of PSF—from its inception to its role in the modern era of fixed-income investing.

1. Early Beginnings and the Genesis of PSF

1.1 The Emergence of Cohen & Steers

The story of the Select Preferred and Income Fund begins with its parent firm, Cohen & Steers, a company founded by financial visionaries who recognized the growing demand for alternative income solutions. In the late 20th century, when investors were seeking yield amidst a backdrop of fluctuating interest rates and evolving market risks, Cohen & Steers set out to develop investment products that would offer stable income and downside protection.

1.2 The Launch of PSF

Capitalizing on the expertise honed in managing specialized securities, Cohen & Steers launched the Select Preferred and Income Fund, Inc. (PSF). The fund was established with a clear mandate: to provide a diversified portfolio primarily composed of preferred securities and other income-bearing instruments. Its structure as a closed-end fund allowed it to pursue long-term opportunities and manage its asset base without the same liquidity concerns as open-end funds.

Key attributes at launch included:

Income Generation: Focus on preferred stocks, which often come with higher yield profiles compared to common equity.
Diversification: Investment across a broad spectrum of preferred securities, convertible bonds, and occasionally, other hybrid securities.
Active Management: Leveraging the research strengths of Cohen & Steers to identify mispriced securities and market inefficiencies in the income sector.

2. Navigating the Market: Growth and Evolution

2.1 The 1990s: Establishing a Market Niche

During the 1990s, PSF quickly carved out a niche among income-focused investors. The decade was marked by:

Increased Demand for Yield: With conventional bond yields under pressure, investors increasingly looked to preferred securities, which PSF aptly provided.
Adapting Investment Strategies: Cohen & Steers continually refined the fund’s approach, balancing fixed-income attributes with selective exposure to credit-sensitive instruments.
Market Recognition: PSF’s performance and stable income distribution garnered attention, paving the way for larger institutional inflows and retail interest alike.

2.2 The Impact of Changing Interest Rate Environments

As the global economic landscape shifted—with periods of both rising and falling interest rates—PSF’s portfolio managers faced the challenge of maintaining income levels while mitigating interest rate risks:

Interest Rate Cycles: The fund’s management had to balance between capturing attractive yields from preferred securities and preserving capital in a rising rate environment.
Credit Quality Management: With a diversified portfolio, the team continuously reassessed the creditworthiness of issuers, anticipating economic downturns and market corrections.
Strategic Adjustments: The active management model allowed PSF to pivot its holdings as market conditions warranted, selecting securities with compelling risk-reward profiles.

3. Investment Strategy and Portfolio Evolution

3.1 Core Investment Philosophy

At the heart of PSF’s strategy lies a commitment to generating consistent income with an emphasis on capital preservation. The fund’s key investment principles include:

Income Orientation: Prioritizing securities that offer reliable dividends or interest payments.
Diversification Across Sectors: While predominantly focused on preferred securities, the fund’s portfolio encompasses various segments, including financials, utilities, and industrials, to achieve broad market exposure.
Active Management Approach: The portfolio is actively managed to take advantage of market dislocations and identify opportunities in undervalued income streams.
Risk Management: The investment process is guided by rigorous risk assessment protocols, ensuring the portfolio remains resilient during market volatility.

3.2 Evolution Over Time

Over the decades, PSF’s holdings have evolved in response to:

Regulatory Changes: Shifts in financial regulation and market transparency have influenced the types of securities that fund managers deem attractive.
Economic Cycles: From the tech boom of the late 1990s to the global financial crisis of 2008 and subsequent recovery, PSF’s portfolio has been continuously recalibrated to reflect changing market dynamics.
Innovation in Financial Instruments: The increasing complexity of hybrid securities and the evolution of structured products offered new avenues for income generation, which the fund integrated into its strategy.

4. Leadership, Management Decisions, and Strategic Milestones

4.1 Founding Leadership and Vision

The success of PSF can be attributed in large part to the visionary leadership at Cohen & Steers. Leaders with deep market insights and a strong commitment to income investing set a foundation that:

Balanced Yield with Safety: They were adept at navigating the trade-offs between high yield and high risk.
Embraced Innovation: The willingness to explore new segments of the income market kept the fund competitive.
Cultivated Trust: Transparent communication and consistent performance established a loyal base of income-seeking investors.

4.2 Strategic Decisions and Key Milestones

Significant milestones in the history of PSF include:

Initial Fundraising and Market Entry: Successfully launching the fund during a time when preferred securities were beginning to draw investor interest.
Navigating Market Crises: Effective management during periods of market stress, such as the Asian financial crisis, the dot-com bubble, and the 2008 global recession, underscored the resilience of its investment approach.
Portfolio Rebalancing Initiatives: Over the years, periodic rebalancing and strategic repositioning ensured that the fund maintained its focus on quality securities and emerged as a stalwart in the income community.
Technological Enhancements: Incorporation of advanced financial analytics and risk management tools helped the fund remain at the forefront of performance tracking and market analysis.
Adoption of ESG Considerations: More recently, the integration of environmental, social, and governance (ESG) metrics into the investment process reflected broader industry trends and investor preferences.

5. Challenges and Adaptations in a Dynamic Market

5.1 Economic and Market Shocks

The journey of PSF has not been without challenges. Market shocks and economic downturns have periodically tested the fund's resilience:

The Global Financial Crisis of 2008: During a period of extreme volatility, PSF’s sophisticated risk management practices helped limit losses for income-focused investors.
Regulatory and Taxation Shifts: Changes in financial regulations and tax policy often had a considerable impact on income securities, requiring the fund to adjust its strategies.
Evolving Market Sentiments: Shifts in investor behavior, particularly after periods of prolonged low yields, meant that PSF had to constantly innovate to maintain its appeal.

5.2 Adaptive Strategies

In response to these challenges, the management team implemented several key adaptations:

Enhanced Credit Analysis: A renewed focus on issuer credit quality, including stronger due diligence and periodic reviews of portfolio exposure to high-risk issuers.
Dynamic Asset Allocation: The fund adopted a more agile asset allocation strategy, ensuring that shifts in market conditions could be met with corresponding portfolio modifications.
Increased Transparency: Greater emphasis on investor communication and detailed reporting about the fund’s strategies and performance helped build confidence during turbulent times.

6. The Modern Era: PSF in the 21st Century

6.1 Integration of Advanced Technologies

As the financial industry embraced digital transformation, PSF benefited from:

Data-Driven Insights: Adoption of advanced analytics provided enhanced assessment capabilities for tracking market trends and identifying potential investment opportunities.
Risk Management Software: Innovative risk management systems allowed for real-time monitoring of portfolio exposures, ensuring that the fund could respond promptly to market changes.
Communication Tools: Enhanced digital reporting to stakeholders ensured greater transparency and ongoing dialogue with investors.

6.2 Responding to the Rise of ESG Investing

A notable trend in recent years has been the increasing importance of environmental, social, and governance factors. PSF has actively:

Evaluated ESG Metrics: Incorporating ESG scores into the investment process to meet the demands of a socially conscious investor base.
Partnered with Research Providers: Collaborating with ESG data agencies to refine screening processes without compromising income generation goals.
Balanced Traditional and ESG Objectives: The fund has maintained its core focus on income while drawing on ESG insights to enhance long-term portfolio quality and risk-adjusted returns.

6.3 Market Performance and Investor Reception

The evolution of the fund's performance has been met by consistent approval from income-oriented investors. Key performance characteristics include:

Steady Income Distributions: One of PSF’s hallmark traits has been its commitment to regular dividend payments, which has rewarded long-term holders.
Resilience in Volatile Markets: The fund’s active management approach has enabled it to weather periods of high volatility with less pronounced drawdowns compared with some of its peers.
Cultural Shift: The fund’s reputation for stability and innovative thinking has contributed to a loyal investor base that values both income reliability and capital preservation.

7. Impact on Income Investors and the Broader Financial Community

7.1 For the Income-Focused Investor

PSF has played a significant role for investors prioritizing yield:

Diversification of Income Sources: By focusing on preferred and related income-producing securities, the fund provides investors a diversified approach to generate stable cash flows.
Risk-Adjusted Yields: It has historically balanced higher-yield opportunities with managerial oversight designed to manage risk.
A Benchmark in the Category: As a longstanding vehicle in the income space, PSF has served as a benchmark for other funds and investment strategies aiming to capture similar market segments.

7.2 Influencing Broader Investment Strategies

Beyond its direct influence on retail and institutional investors, PSF has also contributed to shaping broader market practices:

Innovation in Closed-End Funds: Its model of active management within a closed-end structure has influenced other managers exploring alternative income strategies.
Market Education: Through thought leadership, industry seminars, and investor communications, Cohen & Steers has provided deep insights into the mechanics of preferred securities and income investing.
Catalyst for Hybrid Strategies: The fund’s evolution has prompted further exploration into hybrid instruments, blending features of fixed income and equity to address changing yield environments.

8. Future Outlook and Continued Evolution

8.1 Looking Ahead in a Changing Market Landscape

As financial markets continue to evolve—with technological advancements, shifting investor demographics, and the ongoing integration of ESG factors—PSF remains well-positioned to:

Adapt Investment Strategies: Continued refinement of portfolio allocations and proactive risk management will be critical in addressing future market uncertainties.
Embrace Further Innovation: The integration of artificial intelligence in market analytics, along with further enhancements in digital platforms for investor reporting, could mark the next phase of evolution.
Expand Global Opportunities: An eye on global markets might open up additional areas for diversification, especially as emerging markets begin to offer attractive income-generating opportunities.

8.2 Commitment to Core Fundamentals

Despite the many changes anticipated in the marketplace, the core objectives of PSF endure:

Reliable Income Generation: The steadfast focus on producing steady distributions remains at the heart of the fund’s strategy.
Risk Management Excellence: The commitment to protecting capital and managing downside risks continues to guide the management team.
Active and Adaptive Management: The robust decision-making framework and willingness to adapt to market changes will ensure that the fund can meet future challenges head-on.

9. Conclusion

The history of Cohen & Steers Select Preferred and Income Fund, Inc. (NYSE: PSF) is a testament to the enduring appeal of specialized income investments. From its early days—when the need for innovative yield solutions began to mount—to its current position as a resilient, actively managed closed-end fund, PSF’s evolution mirrors the broader journey of income-oriented investing.

By successfully navigating multiple market cycles, integrating advanced technologies, and embracing the evolving needs of income investors, PSF has not only provided consistent dividends but also helped define and influence strategies within the fixed-income community. Looking forward, as the market landscape continues to shift, the fund’s commitment to delivering reliable income while managing risk positions it for another era of success and innovation.

In essence, the rich history of PSF is not just a chronicle of past achievements—it is a living narrative of adaptation, strategic foresight, and a dedication to meeting investor needs in an ever-changing world.