An investor cannot invest directly in an index, and index performance does not reﬂect the deduction of any fees, expenses or taxes.
Preferred Blended Benchmark: represented by 50% ICE BofAML Fixed Rate Preferred Securities Index and 50% ICE BofAML Capital Securities Index through December 31, 2016 and 60% ICE BofAML US IG Institutional Capital Securities Index, 30% ICE BofAML Core Fixed Rate Preferred Securities Index and 10% Bloomberg Barclays Developed Market USD
Contingent Capital Index for periods thereafter.
Retail (Exchange-Traded) Preferreds: ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of fixed-rate U.S. dollar-denominated preferred securities issued in the U.S. domestic market.
Institutional (Over-The-Counter) Preferreds: ICE BofAML Capital Securities Index is a subset of the ICE BofAML U.S. Corporate Index including all fixed-to-ﬂoating-rate, perpetual callable and capital securities.
Contingent Capital (CoCo) Securities: represented by ICE BofAML Contingent Capital Index through December 31, 2016 and Bloomberg Barclays Developed Market USD Contingent
Capital Index for periods thereafter. The ICE BofAML Contingent Capital Index tracks the performance of U.S. dollar-denominated investment grade and below investment grade contingent capital debt publicly issued in the US domestic and eurobond markets, with a remaining term to final maturity of at least one month and at least 18 months to maturity at point of issuance. The Bloomberg Barclays Developed Market USD Contingent Capital Index 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.
Low-Duration Preferred Primary Benchmark: ICE BofAML 1-3 year U.S. Corporate Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market, with a remaining term to final maturity of less than 3 years.
Corporate Bonds: ICE BofAML Corporate Master Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market.
Municipal Bonds: ICE BofAML Municipal Master Index tracks the performance of U.S. dollar-denominated investment-grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market.
10-Year Treasury: ICE BofAML Current 10-Year U.S. Treasury Index is a one-security index composed of the most recently issued 10-year U.S. Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 10-year note must be auctioned on or before the third business day before the last business day of the month.
TIPS: ICE BofAML U.S. Inﬂation-Linked Treasury Index tracks the performance of U.S. Treasury Inﬂation Protected Securities with at least $1 billion in outstanding face value and a remaining term to maturity greater than one year.
High-Yield Bonds: ICE BofAML High Yield Master Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market.
Data quoted represents past performance, which 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 without notice. It does not constitute investment advice or a recommendation or offer. We consider the information in this material to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of suitability for investment. There is no guarantee that any historical trend illustrated in this report will be repeated in the future, and there is no way to predict when such a trend will begin. There is no guarantee that any market forecast set forth in this material will be realized. Investors should consult their investment, tax or legal professional with respect to their individual circumstances.
This material 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. Please consult with your investment, tax or legal adviser regarding your individual circumstances prior to investing.
Before investing in any Cohen & Steers U.S. registered open-end mutual fund, carefully consider the investment objectives, risks, charges, expenses and other information contained in the summary prospectus and prospectus, which can be obtained by visiting cohenandsteers.com or by calling 800 330 7348. This commentary must be accompanied by the most recent
Cohen & Steers fund fact sheet(s) and summary prospectus if used in connection with the sale of mutual fund shares.
Risks of Investing in Preferred Securities. Investing in any market exposes investors to risks. In general, the risks of investing in preferred securities are similar to those of investing in bonds, including credit risk and interest-rate risk. As nearly all preferred securities have issuer call options, call risk and reinvestment risk are also important considerations. In addition, investors face equity-like risks, such as deferral or omission of distributions, subordination to bonds and other more senior debt, and higher corporate governance risks with limited voting rights. Risks associated with preferred securities differ from risks inherent with other investments. In particular, in the event of bankruptcy, a company’s preferred securities are senior to common stock but subordinated to all other types of corporate debt. Throughout this commentary we will make comparisons of preferred securities to corporate bonds, municipal bonds and Treasury securities. It is important to note that corporate bonds sit higher in the capital structure than preferred securities and therefore, in the event of bankruptcy, will be senior to the preferred securities. Municipal bonds are issued and backed by state and local governments and their agencies, and the interest from municipal securities is often free from both state and local income taxes. Treasury securities are issued by the U.S. government and are generally considered the safest of all bonds since they are backed by the full faith and credit of the U.S. government as to timely payment of principal and interest.
Preferred funds may invest in below-investment-grade securities and unrated securities judged to be below investment grade by the Advisor. 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 benchmarks do not contain below-investment-grade securities.
Contingent capital securities (sometimes referred to as “CoCos”) are debt or preferred securities with loss absorption characteristics built into the terms of the security, for example a mandatory conversion into common stock of the issuer under certain circumstances, such as the issuer’s capital ratio falling below a certain level. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero, and conversion would deepen the subordination of the investor, hence worsening the investor’s standing in a bankruptcy. Some CoCos provide for a reduction in the value or principal amount of the security under such circumstances. In addition, most CoCos are considered to be high yield or “junk” securities and are therefore subject to the risks of investing in 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. Various techniques may be used to shorten or lengthen the Fund’s duration. The duration of a security will be expected to change over time with changes in market factors and time to maturity.
No representation or warranty is made as to the efficacy of any particular strategy or the actual returns that may be achieved.
Cohen & Steers Capital Management, Inc. (Cohen & Steers) is a registered investment advisory firm that provides investment management services to corporate retirement, public and union retirement plans, endowments, foundations and mutual funds.
Cohen & Steers U.S.-registered open-end funds are distributed by Cohen & Steers Securities, LLC, and are available only to U.S. residents. Cohen & Steers UK Limited is authorized and regulated by the Financial Conduct Authority (FRN 458459).
Cohen & Steers Japan, LLC is a registered financial instruments operator (investment advisory and agency business with the Financial Services Agency of Japan and the Kanto Local Finance Bureau No. 2857) and is a member of the Japan Investment Advisers Association.