Head of Fixed Income and Preferred Securities Bill Scapell spoke with Citywire Selector about Cohen & Steers’ preferred securities strategy and his fixed income outlook as central banks battle inflation.
The following article was published by Citywire Selector and is made available here with permission.
ABOUT THE AUTHORS
William Scapell, CFA, Executive Vice President, is Head of Fixed Income and Preferred Securities and a senior portfolio manager for the firm’s preferred securities portfolios.
FURTHER READING
4 Reasons to own preferred securities today
We believe an exceptional buying opportunity for preferred securities may exist today, for several reasons: 1. Current discounts to par value represent uncommon value 2. High-quality preferreds offer some of the highest yields in fixed income 3. Performance historically has been strong following market corrections 4. An end of Fed rate hikes is a possible catalyst for price appreciation
Preferred securities: Resetting for a new cycle
Recent bank turbulence and the end of the Fed’s rate-hiking cycle create what we believe may be an exceptional buying opportunity for preferreds.
Three tax-smart income alternatives
Strategies with inherent tax efficiencies may help investors diversify sources of income and potentially keep more of what they earn.
This is a marketing communication. Please refer to the prospectus of the Cohen & Steers SICAV and to the KIID before making any final investment decisions.
Please see important disclosures and risks below.
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Data quoted represents past performance, which is no guarantee of future results.
There is no guarantee that any market forecast set forth in this article will be realized. There is no guarantee that any historical trend referenced herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The mention of specific securities is not a recommendation or solicitation to buy, sell or hold any particular security and should not be relied upon as investment advice.
This article is for informational purposes and reflects prevailing conditions and our judgment as of the date of this material, which are subject to change. 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. We consider the information in this article 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. There are special risks associated with investing in the Fund. All investments involve risks, including loss of capital, and there is no guarantee that investment objectives will be met. 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. An investment in the Fund 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. The Fund 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 Funds' 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.
Cohen & Steers Ireland Limited is the management company of Cohen & Steers SICAV (the “Management Company”) and is authorized and regulated by the Central Bank of Ireland (No.C188319). The Management Company has appointed Cohen & Steers UK Limited, which is authorized and regulated by the Financial Conduct Authority (FRN458459), as the distributor for the shares of the Fund. Cohen & Steers Capital Management, Inc. is a US registered investment advisory firm that provides investment management services to corporate retirement, public and union retirement plans, endowments, foundations and mutual funds. Cohen & Steers Asia Limited is authorized and regulated by the Securities and Futures Commission of Hong Kong (ALZ367). Cohen & Steers Japan Limited is a registered financial instruments operator (investment advisory and agency business and discretionary investment management business with the Financial Services Agency of Japan and the Kanto Local Finance Bureau No. 3157) and is a member of the Japan Investment Advisers Association.
For investors in Switzerland: The state of the origin of the fund is Luxembourg. In Switzerland, the representative is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the paying agent is Helvetische Bank AG, Seefeldstrasse 215, CH-8008, Zurich. The prospectus, the basic information sheet or the Key Investor Information Documents, the articles of association as well as the annual and semi-annual reports may be obtained free of charge from the representative. In respect of the units offered in or from Switzerland, the place of performance and jurisdiction is at the registered office of the representative. This document provides the investors with key investor information. It is not marketing material.
No representation or warranty is made as to the efficacy of any particular strategy or fund or the actual returns that may be achieved. Shares of the fund are only offered pursuant to the current prospectus, which can be obtained from your financial advisor or by contacting the fund’s administrator. The information in this communication is for informational purposes only and should not be construed as an offer to sell, or a solicitation of an offer to buy, shares of the fund. The sales of shares of the fund may be restricted in certain jurisdictions. In particular, shares may not be offered or sold, directly or indirectly in the United States or to U.S. persons, as more fully described in the prospectus. See prospectus for additional information including important risk considerations, including potential loss of capital, and details about fees and expenses.
This communication is not contractually binding or legislatively required. This communication is not sufficient to make an investment decision. For more information regarding the Cohen & Steers SICAV please visit our website located here (https://www.cohenandsteers.com/), where you can obtain a copy of the most recent prospectus (https://www.cohenandsteers.com/funds/#fund-literature) and KIID documents. Investors and potential investors can obtain a summary in English of investor rights, and information on access to collective redress mechanisms if available, in the prospectus. The manager may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time to time.