The recent growth of the corporate hybrid market has been significant and is attracting increasing attention from both issuers and investors.

Issuance has been strong again in the first few months of 2020 as it has been since 2013. This growth is expected to continue, spurred by issuers looking to decrease their weighted average cost of capital and increase their balance sheet flexibility, and is likely to be increasingly commonly used in financing mergers and acquisitions. For investors, the hybrid universe offers an opportunity to invest in investment grade names while potentially earning returns commensurate with the high-yield market. The incremental yield offered relative to senior unsecured debt presents an attractive way of enhancing performance in the current low-yield environment. However, due to the relatively complex nature of these instruments, investing in corporate hybrids requires specific expertise, including a thorough credit assessment and an in-depth analysis of the issue features in order to reach a conclusion as to a fair valuation.