Hybrids

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Hybrid instruments combine features of debt and equity that can make them attractive instruments in which to invest. At their simplest hybrids offer a regular return with the option to convert into equity (shares) at a future date. However a range of different terms and conditions introduced over the years has made them quite complex instruments. As such it is critical to understand the terms of each hybrid before investing. It is simply not enough to look at the headline yield.

The different hybrids include: preference shares, reset preference shares, convertible notes, capital notes and step-up preference shares just to name a few. Investors need to know what happens at maturity or if the issuing company comes under financial pressure.

Hybrids are becoming increasingly important financial instruments – particularly those issued by financial institutions – as new regulations are introduced to avoid the kinds of bank collapses that the world saw in the wake of the global financial crisis. As such it is more important than ever that investors understand what hybrids are and how they perform under different sorts of circumstances.

YieldReport covers these instruments in detail – explaining the risks inherent in each new product and letting readers know how the returns offered by hybrids compare to other hybrids and other more straightforward instruments.

Each issue of YieldReport also carries detailed statistical data on a wide range of hybrid instruments – and as usual we provide this information in a format that makes it easy to compare products and choose between them.

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