New Potential in Preferreds: Expanding Income While Enhancing Risk/Reward

Strategic, structural and yield spread opportunities have recently prompted investors to re-examine preferred securities. Even modest allocations to this often-overlooked asset class may help strengthen portfolio characteristics by adding a unique, complementary investment profile with highly attractive income rates.

Income-focused investors continue to face a challenging investment environment. Years of low interest rates are keeping income potential constrained across investment grade fixed income markets worldwide, with some sovereign debt even dipping into negative terrain. At the same time, valuations may soon be coming under pressure, as the US Federal Reserve continues to tighten monetary policy in the States and signs of stronger global growth indicate that more foreign central banks are likely to begin following suit sooner rather than later.

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