Preferred securities fund reaches $500m milestone

Principal Global Investors (Europe), a diversified asset management firm, has announced that assets under management in its Preferred Securities Fund have exceeded $500m.

Principal said: “This marks a major milestone for the fund, making it the largest of its kind in Europe. The Ireland-domiciled Ucits fund is sub-advised and actively managed by Spectrum Asset Management, a fully owned specialist boutique of Principal Global Investors.”

Mark Lieb, chief executive of Spectrum Asset Management, said: “Preferred Securities, sometimes referred to as hybrid securities, are bonds that are subordinated to senior bonds but senior to equity of a company. That the size of this Fund has reached this milestone demonstrates that European investors are increasingly recognising the benefits of preferred securities. The yields on preferred securities provide a significant spread over government bonds and senior bonds of the same corporate issuer. They have also exhibited a significantly lower default rate than high yield bonds, providing income seeking investors an efficient way to diversify their portfolios.”

The Fund is available to global retail and institutional investors, aiming to provide an income return consistent with capital preservation. The Fund invests primarily in US dollar-denominated preferred securities and debt securities, though unit classes hedged into a range of currencies are offered. It has a Standard & Poor’s Fund Management rating of AA/V6.

Year-to-date the cumulative performance of the fund stands at 7.5% and the three and five years annualised returns are 29.0% and 3.6% respectively.

Nick Lyster, chief executive of Principal Global Investors Europe, said: “Spectrum’s growing reputation as the leading specialist manager in the Preferred Securities segment is based upon their experience and expertise of their team. That expertise is necessary to navigate a market which is being increasingly impacted by regulatory measures such as Basel III and the Dodd-Frank Act  – and still identify opportunities for investors. We expect Preferred Securities, with their long-horizon yields to assimilate the lower volatility, credit risk and duration of much shorter-term instruments, presenting investors with a unique investment option.”

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