Don't bank on hybrids

Intelligent Investor

Independent Financial Research

Don't bank on hybrids. Alongside the recent collapse in share prices has been a slump in the prices of hybrids, in many cases to below their issue price. I won't say 'I told you so', because I didn't, but my colleague Richard Livingston certainly has done on many occasions. The hybrid gives you the worst of both worlds by limiting your return when things are going well and lumping you in the same boat as equity investors if it all falls apart. Beneath it all, complexity is at the root of all the problems with hybrids. Even the smartest bond traders have trouble pricing these instruments because of the unknowns (for one thing, APRA hasn't clearly explained what might make a bank 'non-viable'), so what hope is there for the rest of us? (VIEW LINK)

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Intelligent Investor
Intelligent Investor
Independent Financial Research

Intelligent Investor is an independent financial research service with a 14-year history of beating the market. Our value investing approach empowers Australians to make more informed decisions to build their long-term wealth. We off structural...


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