Skip to main content
Manulife Investment Management Manulife Investment Management
中文

Fixed Income Strategy:
Preferred Securities

Benefit from a fixed income asset that tends to generally perform well in flat or falling interest rate environment

Preferred securities may benefit from today's market environment Learn more Learn more

How does the current yield of the investment strategy compared to bonds? Learn more Learn more

What differentiates the Manulife strategy from other strategies? Learn more Learn more



Preferred securities may benefit from today's market environment

Historically, in a low-to-flat interest rate environment preferred securities tend to generally perform well. We see this environment prevailing in the fourth quarter of 2019, so preferred securities may benefit as investors seek a higher level of income yield than they can find in the global corporate bond market.

Performance of preferred securities during flat or lowering rate in US1





While we do not believe we are entering a recession, we see positive but declining levels of GDP growth in North America, India and China; flat to contracting GDP growth in Japan and many Eurozone countries. Even in recession times (e.g. 1990/1991 and 2001), the asset class still delivered positive returns.

How preferred securities performed during US recession times2




How does the current yield of the investment strategy compared to bonds?

This investment strategy currently offers higher yields than US investment-grade bonds by 225 basis points. 

Yield comparison3




What differentiates the Manulife strategy from other strategies?

1. No Contingent Convertible securities4 of European banks – which we expect are at risk of underperforming other preferred securities in late 2019 and early 2020.

2. A notable overweight position in preferred securities issued by North American electric and gas utilities (34%)5, utility issuers make up just 8% of the overall preferred securities marketplace6. With such differences, we expect the sector benefits from a high degree of stability and visibility of future-year operating cash flows. Therefore, we believe this will prove favourable in a world of elevated tariff and global trade risks.

While we do not believe we are entering a recession, we must stay mindful of our allocations and believe in a fully diversified portfolio.

  1. Bloomberg, as of 23 September 2019. Annualised price return in US dollars. Past performance is not an indicative of future performance.
  2. Bloomberg, Manulife Investment Management & National Bureau of Economic Research, September 2019. Annualised price returns in US dollars. Past performance is not indicative of future results. The recession periods are defined by the National Bureau of Economic Research. Preferred Securities are represented by ICE BofAML Fixed Rate Preferred Securities Index; US High yield bonds are represented by ICE BofAML US High Yield Index; US Corporate bonds are represented by ICE BofAML US Corporate Index; US Equities are represented by S&P 500 Index.
  3. Bloomberg and Manulife Investment Management, as of 31 August 2019. The current yield of the investment strategy is represented by Manulife Global Fund – Preferred Securities Income Fund, and the average credit rating of the investment strategy is BBB-. Investment grade bonds are represented by ICE BofAML US Corporate Index, with an average credit rating of its securities of A-. The high yield bonds are represented by ICE BofAML US High Yield Index, with an average credit rating of its constituents of B+. The current yield does not represent the distribution yield of the investment strategy and is not an accurate reflection of the actual return that an investor will receive in all cases. A positive distribution yield does not imply a positive return.
  4. Remark: Contingent convertibles (CoCos) are debt instruments mainly issued by European banks. Part of, or the entire security converts to common equity if capital level of the bank issuer declines to levels below regulatory standards, or regulators deem a bank issuer at risk.
  5. Remark: As of 31 August 2019, information about the asset allocation is historical and is not an indication of the future composition.
  6. Manulife Investment Management, as of 31 August 2019. The weighting of the overall preferred securities marketplace is represented by ICE BofAML US All Capital Securities Index.
Learn more: Download fund brochure   Download fund Q&A  
Disclaimer


Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by and the opinions expressed are those of Manulife Investment Management as of the date of writing and are subject to change. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Information about the portfolio’s holdings, asset allocation, or country diversification is historical and is not an indication of future portfolio composition, which will vary. Neither Manulife Investment Management or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.

The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline or other expectations, and is only as current as of the date indicated. There is no assurance that such events will occur, and may be significantly different than that shown here. The information in this material including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. This material was prepared solely for informational purposes and does not constitute a recommendation, professional advice, an offer, solicitation or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security. This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any investment products or to adopt any investment strategy. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Past performance is not an indication of future results.

Investment involves risk. Investors should not base on this material alone to make investment decisions and should read the offering document (if applicable) for details, including the risk factors, charges and features of any investment products.

Proprietary Information – Please note that this material must not be wholly or partially reproduced, distributed, circulated, disseminated, published or disclosed, in any form and for any purpose, to any third party without prior approval from Manulife Investment Management.

This material is issued by Manulife Investment Management (Asia), a division of Manulife Investment Management (Hong Kong) Limited.

This material has not been reviewed by the Securities and Futures Commission (SFC).
502223

Copyright © 2019. Manulife Investment Management (Hong Kong) Limited. All rights reserved. Use of this website is governed by our Terms and Conditions.