For instance, higher short-term rates increases funding costs for REITs, and higher long-term rates could raise book values for existing mortgage REITs. If rates rise, the cost of capital for MLPs would also increase, which would lower distributions on the asset and make the play less attractive.
Additionally, preferred stocks become less attractive in a rising rate environment as prices fall to bring yield back up to an attractive level. Most preferred stock have no maturity, which makes them susceptible to duration as well. Preferreds are also at risk in a falling rate environment since issuers could call shares and reissue shares at lower rates.
Bonds would also see prices fall in a rising rate environment, especially those with longer maturities since newer issues would be have higher returns.
For more information on multi-asset investments, visit our multi-asset ETFs category.
Max Chen contributed to this article.