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CIP Quips

Fixed on Floaters?

Did you know…

The preferred securities market is up 9% since the beginning of the year.* That performance has given back somewhat in July and August as corporate spreads have widened. As the traditional preferred market pulls back slightly, we are picking up several basis points of yield in the Current Income Portfolio by incorporating a newer type of preferred security: hybrid fixed to floating rate preferreds.

As the name implies, these hybrid securities offer a fixed coupon for a specific period of time, which then begins floating at a spread determined at issuance over a specific benchmark (typically 3 month LIBOR). Fixed to floating rate preferreds are typically offered at $1,000 par values and in a rising rate environment can provide a higher dividend payment and greater price stability as the coupon will periodically reset and reflect those higher rates.

 

PowerShares Variable Rate Preferred Portfolio (VRP) vs.
BofA Merrill Lynch Fixed Rate Preferred Securities Index (P0P1)

(12/31/16 – 8/21/17)

Source: Bloomberg

What are we thinking?

We believe that by incorporating hybrid fixed to floating rate preferreds into CIP’s preferred security allocation, we are offering an attractive solution for income investors who are looking for conservative allocations and additional yield in this low interest rate environment. 

 

* Year to date performance of the BofA Merrill Lynch Fixed Rate Preferred Securities Index as of 8/21/17



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages domestic equity, international equity, domestic fixed income, global fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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