Preferred Securities
Multi-asset strategy: Aim to offer relatively compelling yields with high credit quality
Preferred securities offer opportunities in today's market environment
Historical performance during past rate cycles1
There are couple of reasons for preferred securities to standout:
1. High-yielding buffer and extra carry: Yields of preferred securities stand out from other investment grade bonds and are as competitive as those of high yield bonds. From a total return perspective, the higher the income from yields, the more the compensation for the loss in bond price when rates hike.
2. Low duration & fixed-to-floating rate coupon: Preferreds are generally low duration securities as most are callable after a certain period of time. Some preferreds having fixed-to-floating rate coupon also offer investors some coupon protection from rising rates compared with traditional bonds.
3. Financial companies dominated in preferred market: Margins for banks typically improve when yield spreads widen or interest rates go higher, this can lead to higher profitability which also helps support the investment performance for preferred securities.
How much yield do preferred securities offer compared to other bonds?
Preferred securities, with an average investment grade, are offering around 4.3% yield to maturity, which is more attractive when compared to 1.2% of US Treasuries and 2.4% of US investment grade corporate bonds.
Yield of major fixed income assets (%)2
What differentiates our strategy from others?
Sector Allocation (%)3
Learn more:
There are couple of reasons for preferred securities to standout:
1. High-yielding buffer and extra carry: Yields of preferred securities stand out from other investment grade bonds and are as competitive as those of high yield bonds. From a total return perspective, the higher the income from yields, the more the compensation for the loss in bond price when rates hike.
2. Low duration & fixed-to-floating rate coupon: Preferreds are generally low duration securities as most are callable after a certain period of time. Some preferreds having fixed-to-floating rate coupon also offer investors some coupon protection from rising rates compared with traditional bonds.
3. Financial companies dominated in preferred market: Margins for banks typically improve when yield spreads widen or interest rates go higher, this can lead to higher profitability which also helps support the investment performance for preferred securities.
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