FIXED INCOME AND DEBT SECURITIES

Consistent returns in volatile times.

HYBRIDS

Hybrids are a class of securities that have both debt and equity features. There are three broad types of hybrids – convertibles, preference shares and capital notes.
These securities: Usually pay fixed or floating interest payments (or ‘dividend payments’) over a defined period. Often contain rules that allow the issuer of the hybrid the right to buy the security within a defined period, as well as other features that may impact the payment of interest. The most important aspect of hybrid securities is the credit/financial strength of the underlying issuer, and the ability of the issuer to meet its ongoing interest payments and capital repayments.
Hybrids tend to pay regular income. Some hybrid securities offer franking credits. Receive dividend income – depending on the companies you’ve selected. You can sell a part (or all) of your hybrid holding to meet any urgent cash needs. All securities listed on stock exchanges are required to keep the market informed about their financial health. Guaranteed settlement through the central clearing house – CHESS.
  • In some cases investors are taking on equity-like risks but only receiving bond-like returns.
  • Coupons are not guaranteed.
  • Some hybrids have investment terms lasting as long as 60 years.
  • Hybrids lie at the riskier end of a company’s capital structure.

When considering these products please refer to the specific risks outlined in the relevant offering document.

FIXED INCOME

A bond is an over-the-counter (OTC) fixed income security, which is not listed on a formal exchange such as the Australian Stock Exchange (ASX).
These securities: Usually pay fixed or floating interest payments (or ‘dividend payments’) over a defined period. Often contain rules that allow the issuer of the hybrid the right to buy the security within a defined period, as well as other features that may impact the payment of interest. The most important aspect of hybrid securities is the credit/financial strength of the underlying issuer, and the ability of the issuer to meet its ongoing interest payments and capital repayments.
Hybrids tend to pay regular income. Some hybrid securities offer franking credits. Receive dividend income – depending on the companies you’ve selected. You can sell a part (or all) of your hybrid holding to meet any urgent cash needs. All securities listed on stock exchanges are required to keep the market informed about their financial health. Guaranteed settlement through the central clearing house – CHESS.
  • In some cases investors are taking on equity-like risks but only receiving bond-like returns.
  • Coupons are not guaranteed.
  • Some hybrids have investment terms lasting as long as 60 years.
  • Hybrids lie at the riskier end of a company’s capital structure.

When considering these products please refer to the specific risks outlined in the relevant offering document.

Further reading