Preferred Securities Strategy

Preferred Securities Strategy

Preferred Securities Strategy

 
 
 
Summary

The Preferred Securities Strategy seeks income by investing in $25 par fixed rate and “fixed-to-float” preferred securities that provide qualified dividend income (QDI). Their bottom-up process selects securities based on criteria including credit fundamentals, liquidity and call features.

 
 
Investment Approach
Philosophy

An increasingly complex marketplace calls for active management. With Fixed Income markets becoming more fragmented, solutions that offer ongoing credit review and management, professional sourcing of inventory and agency trade execution can add critical value.

A multi-faceted approach that combines top-down and bottom up analysis drives security selection, and positions the team to take advantage of evolving market opportunities.

Managing risk is key, which is why the portfolio managers use conservative risk parameters to construct the portfolios and help mitigate downside risk.

 
Differentiators
Customized fixed income solution

Designed to help meet the unique needs of clients and help them meet their investment goals. 

Accessibility

Our solutions offer clients timely insights,  transparency and portfolio manager access.

Deep experience

Lead portfolio managers have decades of experience managing portfolios through multiple market cycles. 

 
 
 
Investment Process
fixed-income-managed-solutions-strategy-investment-process
 
 
Portfolio Manager  
Kevin Lynyak
Managing Director
26 years industry experience
 
 
 
 

RISK CONSIDERATIONS:
There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio may be subject to certain additional risks.
Preferred Stocks. Preferred stocks are securities that evidence ownership in a corporation and pay a fixed or variable stream of dividends. Preferred stocks have a preference over common stocks in the event of the liquidation of an issuer and usually do not carry voting rights. Preferred stocks have many of the characteristics of both equity securities and fixed-income securities. In general, equities securities’ values also fluctuate in response to activities specific to a company. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes.  Secondary market risk, which is the risk that while a secondary market exists for most fixed income securities, there is no guarantee that a secondary market will exist for a particular fixed income security. Furthermore, if a security is sold prior to maturity, the price received may be more or less than face value, or the amount of the original investment. Call Risk, which is the risk that some securities may be callable. If the security is called, the investor bears the risk of reinvesting the proceeds at a lower rate of return. Foreign exchange risk, which is the risk that changes in the value of the dollar may affect the value of non-U.S. dollar denominated fixed income securities in relation to the particular currency to which an issue is exposed.

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be appropriate for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

This material is a general communication, which is not impartial and all information provided has been prepared solely for informational and educational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

OTHER CONSIDERATIONS:
The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of US Dollar denominated fixed rate, investment grade exchange-traded preferred securities.

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.

 

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