Non-financial corporate hybrid securities have long been a feature of the European fixed income market. Their unique structure has attracted both issuers and investors, enabling the sector to grow rapidly over the past decade. U.S. dollar issuance also picked up significantly during 2024. In this article we explain what corporate hybrids are and why we think more investors should get to know them.
Hybrids Can Diversify a Fixed Income Portfolio and a Multi-asset Portfolio
Annualized return and volatility of fixed income portfolios with rising allocations to corporate hybrids, March 2023 to February 2025
Correlation of monthly returns, March 2023 to February 2025
Source: Bloomberg, Neuberger Berman. Data as of February 28, 2025. The “core” portfolio in the top chart is illustrative and consists of 60% investment grade bonds and 40% high yield bonds. Indices used: Bloomberg Global Corporate Hybrids 3% Issuer Cap Index (Corporate Hybrids); Bloomberg Global High Yield Total return Index (High Yield Bonds); Bloomberg Global Aggregate Corporate Index (Investment Grade Bonds); Bloomberg Global Aggregate Government Index (Government Bonds); Bloomberg European Banks CoCo Index (Additional Tier-1 Capital); S&P 500 Index (U.S. Equities); MSCI World Index (Developed Market World Equities). Indexes are unmanaged and are not available for direct investment. Nothing herein constitutes a prediction or projection of future events or future market behavior. Historical trends do not imply, forecast or guarantee future results. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed or any historical results. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.
