We believe an exceptional buying opportunity for preferred securities may exist today.
1. High-quality preferreds offer some of the highest yields in fixed income
Issued primarily by investment grade companies, preferreds offer historically high yields of 6–8%, providing stable income in the near- term and long-term total return potential as interest rate uncertainty persists.
2. Net issuance remains low, providing supportive supply/demand dynamics
Large redemptions keep preferred securities net issuance low and exchange-traded redemptions exceed issuance, further reducing the size of the exchange-traded preferred market, supporting remaining issues
At December 31, 2024. Source: ICE BofA, Cohen & Steers.
Past performance is no guarantee of future results. The information presented does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee that investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. (1) ICE USD Contingent Capital Index (2) ICE BofA Investment Grade Institutional Capital Securities Index (3) ICE BofA Core Fixed Rate Preferred Securities Index (4) ICE BofA US Corporate Index (5) Bloomberg 10-year constant maturity treasury yield (6) US 10-year Municipal bond yield.
3. Favorable after-tax total returns vs corporate bonds
High income and minimal impact from defaults can provide attractive long-term total returns relative to other fixed income segments.(5)
At December 31, 2024.
Past performance is no guarantee of future results. The information presented above does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee that investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future or any way to know in advance when such a trend might begin. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.
(1) ICE BofA Investment Grade Institutional Capital Securities Index (Credit quality: BBB) tracks the performance of U.S. dollar-denominated investment grade hybrid capital corporate and preferred securities publicly issued in the US domestic market. (2) ICE BofA Corporate Master Index (Credit quality: BBB) tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market. (3) ICE BofA U.S. High Yield Institutional Capital Securities Index tracks the performance of USD-denominated investment grade hybrid capital corporate and preferred securities publicly issued in the U.S. domestic market. (4) ICE BofA High Yield Master Index (Credit quality: B+) tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. (5) Based on historical 10-year total returns of indices footnoted in (1), (2), (4), and (5) as of 12/31/24. Assumes taxation at the highest marginal U.S. Federal income tax rates of 37% for interest income and 20% for QDI, with an additional 3.8% Medicare surcharge on all tax rates.
FURTHER READING
Income investing redefined: The case for preferred securities
High yield does not have to mean high risk—preferred securities offer investors a compelling middle ground, providing attractive income, total returns and portfolio diversification from high-quality issuers.
Navigating 2025: 3 Key insights on preferred securities
After a strong 2024 for preferreds, we are watching the impact of the election, the interest rate environment and sector performance in 2025.
Cohen & Steers – 40 years, one obsession: Performance
For nearly 40 years, Cohen & Steers has been delivering results built on the bedrock of our philosophy, our passion, our obsession: performance.
Index definitions and important disclosures
An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.
Preferred securities: OTC: ICE BofA U.S. IG Institutional Capital Securities Index (Credit quality: BBB) tracks the performance of USD-denominated investment grade hybrid capital corporate and preferred securities publicly issued in the U.S. domestic market. Retail: ICE BofA Core Fixed Rate Preferred Securities Index (Credit quality: BBB-) tracks the performance of fixed-rate U.S. dollar-denominated preferred securities issued in the U.S. domestic market. CoCos: The Bloomberg Developed Market Contingent Capital Index (Credit quality: BB) includes hybrid capital securities in developed markets with explicit equity conversion or write down loss absorption mechanisms that are based on an issuer’s regulatory capital ratio or other explicit solvency-based triggers. U.S. bonds: ICE BofA Corporate Master Index (Credit quality: A-) tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market
Past performance is no guarantee of future results. This material is for informational purposes and reflects prevailing conditions and our judgment as of this date, which are subject to change. There is no guarantee that any market forecast set forth in this presentation will be realized. This material represents an assessment of the market environment at a specific point in time and should not be relied upon as investment advice, does not constitute a recommendation to buy or sell a security or other investment and is not intended to predict or depict performance of any investment. This material is not being provided in a fiduciary capacity and is not intended to recommend any investment policy or investment strategy or take into account the specific objectives or circumstances of any investor. We consider the information in this presentation to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of appropriateness for investment. Please consult with your investment, tax or legal professional regarding your individual circumstances prior to investing.
Risks of investing in preferred securities. An investment in a preferred strategy is subject to investment risk, including the possible loss of the entire principal amount that you invest. The value of these securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Below-investment-grade securities or equivalent unrated securities generally involve greater volatility of price and risk of loss of income and principal and may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-grade securities. The strategies’ benchmarks do not contain below investment-grade securities. Duration risk. Duration is a mathematical calculation of the average life of a fixed- income or preferred security that serves as a measure of the security’s price risk to changes in interest rates (or yields). Securities with longer durations tend to be more sensitive to interest rate (or yield) changes than securities with shorter durations. Duration differs from maturity in that it considers potential changes to interest rates, and a security’s coupon payments, yield, price and par value and call features, in addition to the amount of time until the security matures. The duration of a security will be expected to change over time with changes in market factors and time to maturity.
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