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CIP Quips

Perks of Preferreds

Did you know...

Some of the questions we hear most frequently from advisors surround a common topic, preferred securities. We’ve noticed advisors tend to shy away from owning individual preferred securities due to the tedious work needed to follow call provisions, credit ratings and tax treatment.  We believe, that with proper management, a sleeve of relatively conservative, investment grade, preferred securities can help diversify a fixed income portfolio and enhance yield.

The FOMC has raised rates several times so far in 2016 and 2017, and seem to have reached a deliberation point as to whether we will see another rate hike in the near term. We have also seen the 10 year treasury yield stall.  Against this backdrop of the market reaching down the capital structure to buy yield, the preferred securities market has performed well. 

And those who have dabbled in preferred securities over the long term have been rewarded. Since 1990, the BofA Merrill Lynch Fixed Rate Preferred Securities Index has averaged a total return of 6.67%. Year to date, the index is up 8.72% and has an average current yield of 5.70%.

BofA Merrill Lynch Fixed Rate Preferred Securities Index 
Historic Quarterly Returns & Current Yield 
(3/31/11 - 6/30/17)

Source: Bloomberg

What are we thinking? 

Our Current Income Portfolio uses fixed to floating rate and pure floating rate preferred securities, which provide coupon payments that increase in line with rates. Packaged with our intermediate investment grade corporate bond allocation, our opportunistic preferred sleeve is designed to pick up extra yield that income investors need, in a conservative, diversified and balanced manner.  



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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