Navigating Hybrids

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Livewire Markets

Due to their attractive income, franking credits and relative capital stability, it is easy to see why Australian investors are drawn to Hybrids – with the Australian Hybrids market now over $55B in size.

While Hybrids are attractive in many ways, some investors don’t appreciate that they come with certain risks and complexities, and require vigilant oversight. In addition, given that most investors simply buy and hold Hybrids, few investors seek out mispricing opportunities or consider the individual risk profile of each security. This presents an opportunity for specialist active managers.

Key points

  • The terms of hybrids can be complex and varied, making analysis difficult
  • Investors may often underestimate or not be aware of the risks involved in owning hybrids directly
  • An active approach to managing hybrids can potentially reduce portfolio risk, and seek to take advantage of market mispricing to deliver outperformance

Taking the headache out of hybrids

BetaShares has just launched HBRD, the first Active ETF in Australia providing access to a professionally managed, diversified portfolio of Hybrid securities. More information here

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