SMSF trustees and their advisers should be cautious of the protections they are afforded in hybrids before investing, according to FIIG Securities.
Speaking to SMSF Adviser, FIIG’s director for fixed income sales, Simon Michell, said the new versions of hybrid securities being issued have experienced a “significant drop” in value, reflecting their relatively high levels of risk.
“We don’t have a problem with those hybrid securities, they’re great they’re issued by major banks, but you don’t want to be using them for your fixed income allocation because they won’t provide the protections that you want,” Mr Michell said.
Also speaking to SMSF Adviser, Verante Financial Planning’s director Liam Shorte said he is concerned about trustees chasing yield on hybrids.
“A lot of people don’t understand the high risk that they’re taking, and not necessarily for a high return when compared with the company share,” he said.
“Most of the people with SMSFs seem to be learning a lot more about the different sectors, and you can just see that by the very fact of the interest shown in new hybrid issues. People are definitely reading about options for SMSFs and looking for those opportunities.”
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