The Strategy offers the potential for above-average income and attractive total returns, accessing the full spectrum of the preferred securities market while managing long-term credit and interest-rate risks.
- Invests in preferred securities and unsecured debt of U.S. and non-U.S. companies
- Includes both $25-par exchange-traded (retail) issues and over-the-counter (institutional) issues
- Invests primarily in investment grade securities, with opportunistic allocations to below investment grade issues
- Typically holds more than 100 securities
- Diversified across issuers and sectors, although the strategy is classified as non-diversified, as a majority of holdings are in the financial sector, consistent with the preferred securities market
The asset class
Preferred securities have historically offered the highest yields in the investment-grade market due to their subordinated creditor standing. Preferred securities also exhibit equity-like qualities, including price appreciation potential. Moreover, we see meaningful opportunities in today’s preferred securities market as a result of global financial regulatory reform. As rules regarding Tier 1 regulatory capital treatment are implemented over the coming years, we expect to see an accelerating wave of tender and call activity by financial institutions, creating the potential for active investment managers to add value.
To take full advantage of these opportunities, the strategy utilizes the complete spectrum of the global preferred securities market, enabling us to maximize potential total return and current income, and allows us greater flexibility to navigate changing market conditions. Read more
Our investment process
Our investment team conducts rigorous fundamental research by analyzing traditional credit metrics, valuing the structural features of individual securities and assessing external market factors. Using proprietary pricing models, the team uses these inputs to identify securities they believe to be undervalued relative to their modified option-adjusted credit risk spread.
Why invest with us?
Our dedicated preferred securities team brings extensive industry experience, supported by firm's long tradition of income-oriented investing. As global investors with offices in New York, London and Hong Kong, we have access to a wide range of institutional securities, including non-registered 144A securities and Reg-S transactions involving non-U.S. issuers that are placed exclusively outside the United States. Together, our experience and global capabilities provide the insight and versatility to adapt to changing economic environments and opportunities.
|William Scapell, CFA||Executive Vice President, Portfolio Manager||New York||Bio|
|Elaine Zaharis-Nikas, CFA||Senior Vice President, Portfolio Manager||New York||Bio|
|Jerry Dorost, CFA||Vice President, Associate Portfolio Manager||New York|
|Raquel Episcopio, CFA||Vice President, Research Analyst||New York|
|Robert Kastoff, CFA||Vice President, Research Analyst||New York|
How to invest »Learn more
The views and opinions in the preceding commentary are subject to change and represents an assessment of the market environment at a specific point in time, should not be relied upon as legal, investment or tax advice and is not intended to predict or depict performance of any investment. We consider the information 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. Investors should consult their own advisors with respect to their individual circumstances. 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. There is no guarantee that a market forecast made in this commentary will be realized.
Please consider the investment objectives, risks, charges and expenses of any U.S. Registered open-end fund carefully before investing. A summary prospectus and prospectus containing this and other information may be obtained by calling 1-800-330-7348 or clicking here. Please read the prospectus carefully before investing.
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. The fund is classified as a “non-diversified” fund under the federal securities laws because it can invest in fewer individual companies than a diversified fund. However, the fund must meet certain diversification requirements under the U.S. tax laws.
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 presentation we will make comparisons of preferred securities to corporate bonds, municipal bonds and 10-Year Treasury bonds. 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. 10-Year Treasury bonds are issued by the U.S. government and are generally considered the safest of all bonds since they're backed by the full faith and credit of the U.S. government as to timely payment of principal and interest.
Cohen & Steers open-end funds are distributed by Cohen & Steers Securities, LLC.