Back to Basics: Corporate Hybrids

Corporate hybrids are a type of financial instrument issued by non-financial corporates. They are a form of subordinated capital, meaning that they rank lower in priority compared to other forms of debt, and the hybrid nature arises from the fact that they share characteristics with both debt and equity securities. Corporate hybrids are an important part of many companies’ capital structures as the hybrid features help protect issuer credit ratings while raising capital. While more complex to analyse and requiring investors to be selective, yields in the space are higher, offering attractive opportunities with an element of diversification for fixed income investors.