Inflation is high and the rate outlook is for continued U.S. Federal Reserve tightening. This has put pressure on investors seeking a stable source of future cash flows that’s not as sensitive to rising rates. Preferreds strategies could fill this income gap.
Preferred securities have characteristics of both stocks and bonds, which means they can help diversify a traditional investment portfolio while allowing an investor to pursue an alternative source of yield.
In the upcoming webcast, Seeking stable cash flow in today’s market, Rick Baker, managing director of the Client Portfolio Management Team at Manulife Investment Management; Joseph Bozoyan, portfolio manager at Manulife Investment Management; and Ryan Wellman, product manager at John Hancock Investment Management, will outline the benefits of preferreds.
“Preferred securities can play a supporting role in portfolios for investors looking for attractive income, diversification, and some protection against rising interest rates,” according to Manulife Investment Management.
Specifically, investors can take a look at the actively managed John Hancock Preferred Income ETF (JHPI). The ETF is sub-advised by Manulife Investment Management (US) LLC, John Hancock Investment Management’s affiliated asset manager.
JHPI is an actively managed ETF that seeks to provide a high level of current income, consistent with the preservation of capital, by investing at least 80% of its net assets in preferred stocks and other preferred securities. The manager focuses on sector allocation, industry allocation, and security selection in making investment decisions and looks to invest in securities that may be undervalued relative to similar securities in the marketplace.
“An active approach to preferred securities that takes a broader view than index-linked ETFs may make sense for investors seeking potential outperformance and the asset class’s full opportunity set,” according to Manulife Investment Management.
The John Hancock Preferred Income ETF seeks a high level of current income, consistent with the preservation of capital. The strategy also offers help with diversifying sources of income. The active managers will target a portfolio of preferred securities that can generate high income and preservation of capital.
The ETF’s portfolio will focus on preferred securities that include but are not limited to, convertible preferred securities, corporate hybrid securities, trust preferred securities, cumulative and noncumulative preferred stock, and depositary of preferred stock.
Financial advisors who are interested in learning more about preferreds can register for the Wednesday, October 12 webcast here.