Preferred Securities

INVESTMENT CAPABILITIES

Within the preferred securities marketplace, Stonebridge has expertise in:

• Tax-Advantaged Preferred Stocks
• Taxable Preferred Stocks
• Fixed and Adjustable Rate Preferred Stocks
• Institutional and Retail Structured Portfolios

PORTFOLIO MANAGEMENT

Stonebridge has the capability to manage preferred securities portfolios for:

• Institutional Accounts
  • Insurance Companies
  • Endowments and Charitable Foundations
  • Pension and Retirement Systems
  • Non-Profit Organizations
• Separate Managed Accounts
• Closed-End Funds

ABOUT PREFERRED SECURITIES

Preferred Securities are predominantly fixed-income securities similar in some respects to corporate or municipal bonds. The majority of preferred securities pay a fixed dividend to investors on a quarterly basis. Consequently, their stock price is sensitive to interest rate changes.

Depending on how securities are structured, issuers of preferred securities generally get equity treatment on their balance sheets, unlike corporate bonds and other fixed-income securities. Receiving equity treatment is important to regulated industries such as banking, brokerage or insurance because they need to meet certain statutory capital levels. Historically, how much equity treatment an issuer receives has changed often, but investment bankers are constantly working to create the optimal structure to maximize equity treatment while keeping the cost of capital down. Although at times this has been an expensive form of financing for the issuer, it consistently translates into attractive yields for investors.

The majority of preferred securities have a credit rating by some or all of the major rating agencies. Those issues carrying a BBB- rating or higher are considered investment-grade. Higher credit ratings indicate a better probability that the issuer will be able to meet its dividend payments going forward. In a bankruptcy case, preferred securities shareholders are paid after fixed-income bondholders and before common shareholders, which also translates to higher yields on preferreds relative to other fixed-income investments.