What are preferred securities?
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Preferred securities are a hybrid of bonds and equities with features from both asset classes. Preferred securities rank between senior debt and common equity in the capital structure of a corporate.
Preferred securities held up well during high inflationary period
During periods of higher inflation over the past 20 years, preferred securities generally held up well with positive returns above US IG corporate bonds and US Treasuries. This is primarily driven by the credit spread that offset the inflation risk and to its high yielding buffer and strong credit fundamentals.
Average monthly return in periods of higher inflation during 2002 to end of 2022 (US CPI>2%)2
Yields are getting more attractive
With increasing market volatility and lifting inflation, investors are seeking for stable and higher income assets. Preferred securities can offer a combination of attractive yield characteristics, inflation-hedging potential and interest rate risk mitigation versus other high grade fixed income sectors.
Along with rising Treasuries yield, the yield of maturity of preferred securities has risen to the highest level in past one decade, providing attractive income potentials.
Preferred securities yields over the last decade3
Strong rebound after drawdowns
Like other asset classes, preferred securities experienced market drawdowns, including sell-offs in 2008 (GFC); 2011 (Euro crisis); 2013 (Fed Tapering); 2016 (oil prices decline); 2018 (Fed hiking rates); and 2020 (Covid-19). With similar average drawdowns to other asset classes, preferred securities have been able to rebound strongly and have a relatively shorter recovery period on average.
Historical performance of preferred securities4
Share Class | Class AA (SGD Hedged) MDIST (G) | Class AA (USD) MDIST (G) | Class AA (AUD Hedged) MDIST (G) |
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Investment objective | The Fund aims to provide income generation with potential long term capital appreciation by investing primarily in preferred securities. | ||
Inception date | 11/09/2018 | ||
ISIN code | LU1850216372 | LU1813986715 | LU1813986806 |
Bloomberg ticker | MLPIASM LX | MLPIAUM LX | MLPIAAM LX |
Base currency | USD | ||
Mode of subscription | Cash and SRS | Cash | Cash |
Minimum investment | USD 1,000 (or the equivalent in any other major currency) | USD 1,000 (or the equivalent in any other major currency) | USD 1,000 (or the equivalent in any other major currency) |
Distribution frequency1 | Monthly | ||
Management fee | 1.10% p.a. | ||
Initial sales charge | Up to 5.0% | ||
Dealing frequency | Daily | ||
Investment manager | Manulife Investment Management (US) LLC | ||
Fund size | USD 281.8 million (as of 31 Jan 2024) |
Class A- QDis SGD |
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Investment objective | The Fund aims to provide investors with long-term capital appreciation and/or income in SGD terms through investing primarily in Asian investment grade fixed income or debt securities. |
Base currency | SGD |
Mode of subscription | Cash and SRS |
Share class currency | SGD |
Launch price | SGD 1.00 per unit |
Minimum investment | S$1,000 |
Distribution frequency | Declare quarterly distributions on 15th calendar day of March, June, September and December (or the next Business Day if that day is not a Business Day) |
Management fee | 1% p.a. |
Initial sales charge | Up to 3.0% |
Initial sales charge | Up to 3.0% |
Dealing frequency | Daily |
Investment manager | Manulife Investment Management (Singapore) Pte. Ltd. |
Investment objective: The Fund aims to provide income generation with potential long term capital appreciation by investing primarily in preferred securities.
Inception date: 11/09/2018
ISIN code: LU1850216372
Bloomberg ticker: MLPIASM LX
Base currency: USD
Mode of subscription: Cash and SRS
Minimum investment: USD 1,000 (or the equivalent in any other major currency)
Distribution frequency1: Monthly
Management fee: 1.10% p.a.
Initial sales charge: Up to 5.0%
Dealing frequency: Daily
Investment manager: Manulife Investment Management (US) LLC
Fund size: USD 288.06 million (as of 31 July 2021)
Investment objective: The Fund aims to provide income generation with potential long term capital appreciation by investing primarily in preferred securities.
Inception date: 11/09/2018
ISIN code: LU1813986715
Bloomberg ticker: MLPIAUM LX
Base currency: USD
Mode of subscription: Cash
Minimum investment: USD 1,000 (or the equivalent in any other major currency)
Distribution frequency1: Monthly
Management fee: 1.10% p.a.
Initial sales charge: Up to 5.0%
Dealing frequency: Daily
Investment manager: Manulife Investment Management (US) LLC
Fund size: USD 288.06 million (as of 31 July 2021)
Investment objective: The Fund aims to provide income generation with potential long term capital appreciation by investing primarily in preferred securities.
Inception date: 11/09/2018
ISIN code: LU1813986806
Bloomberg ticker: MLPIAAM LX
Base currency: USD
Mode of subscription: Cash
Minimum investment: USD 1,000 (or the equivalent in any other major currency)
Distribution frequency1: Monthly
Management fee: 1.10% p.a.
Initial sales charge: Up to 5.0%
Dealing frequency: Daily
Investment manager: Manulife Investment Management (US) LLC
Fund size: USD 288.06 million (as of 31 July 2021)
Joseph H. Bozoyan, CFA, is a portfolio manager in the Preferred Income Management Team at Manulife Investment Management. He was previously a managing director and senior investment analyst in Manulife’s Intrinsic Value Team, providing dedicated research for all strategies managed by that team. Prior to joining the company, Joe was a senior equity analyst in small, SMID and all cap portfolios at Ironwood Investment Management. Earlier in his career, he held analyst roles at companies such as Evergreen Investments, RCM and Sun Life. He is a CFA charterholder and a member of the CFA Society Boston, Inc.
Joseph H. Bozoyan, CFA, is a portfolio manager on the Preferred Income Management Team at Manulife Investment Management. He was previously a managing director and senior investment analyst on Manulife’s Intrinsic Value Team, providing dedicated research for all strategies managed by that team. Prior to joining the company, Joe was a senior equity analyst on small, SMID and all cap portfolios at Ironwood Investment Management. Earlier in his career, he held analyst roles at companies such as Evergreen Investments, RCM and Sun Life. He is a CFA charterholder and a member of the CFA Society Boston, Inc.
Bradley Lutz, CFA, is a managing director and portfolio manager in the Preferred Income Team at Manulife Investment Management. Brad is also a senior investment analyst, supporting the company’s fixed income strategies. He provides expertise in the power & utility, aerospace & defense, and industrial sectors. Most recently, he was responsible for the same duties at Declaration Management & Research, an affiliate of Manulife. Earlier in his career, he worked for Summit Investment Partners in Cincinnati, Ohio, with research, trading and portfolio management responsibilities for high yield and investment grade corporate bonds. Before Summit, Brad was with Pacholder Associates, Inc. as a high yield credit analyst. Brad is a CFA charterholder.
Bradley Lutz, CFA, is a managing director and portfolio manager on the Preferred Income Team at Manulife Investment Management. Brad is also a senior investment analyst, supporting the company’s fixed income strategies. He provides expertise in the power & utility, aerospace & defense, and industrial sectors. Most recently, he was responsible for the same duties at Declaration Management & Research, an affiliate of Manulife. Earlier in his career, he worked for Summit Investment Partners in Cincinnati, Ohio, with research, trading and portfolio management responsibilities for high yield and investment grade corporate bonds. Before Summit, Brad was with Pacholder Associates, Inc. as a high yield credit analyst. Brad is a CFA charterholder.
Notes:
1. The intention of Manulife Global Fund to make the monthly distribution and the distribution yield for the Fund is not guaranteed, and Manulife Global Fund may in future review the distribution policy depending on prevailing market conditions. The Fund invests mainly in preferred securities.
2. Excluding GFC during Sep 2007 to Nov 2009. Manulife Investment Management, Bloomberg, as of 31 December 2022. Performance is total return in USD. US HY corp bonds are represented by ICE BofA US High Yield Index; Preferred securities are represented by ICE BofA US All Capital Securities Index; US IG Corp bonds are represented by ICE BofA US Corporate Index, US treasuries are represented by ICE BofA US Treasury & Agency Index. Global aggregate bonds represented by Bloomberg Barclays Global aggregate bond Index. For illustrative purposes only. Past performance is not indicative of future performance.
3. Bloomberg, as of 31 December 2022. Preferred securities are represented by ICE BofA US All Capital Securities Index (I0CS). Past performance is not indicative of future performance.
4. Manulife Investment Management, Morningstar, Bloomberg, monthly performance, as of 31 December 2022. Preferred markets are represented by the ICE BofA US Capital Securities Index since ICE BofA US All Capital Securities Index has shorter history starting from 2012. Global Corp HY represented by Bloomberg Barclays Global Corporate High Yield Index. US High Yield represented by ICE BofA US High Hield Index. EM USD bonds represented by ICE BofA Emerging Market External Sovereign Index. Leveraged Loans represented by Credit Suisse Leveraged Loan Index. Past performance is not indicative of future performance.
Important Information
Manulife Global Fund (the “Company”) is an open-ended investment company registered in the Grand Duchy of Luxembourg. The Manulife Global Fund – Preferred Securities Income Fund (the "Fund") is recognised under the Securities and Futures Act of Singapore for retail distribution. The Company has appointed Manulife Investment Management (Singapore) Pte. Ltd. (Company Registration Number: 200709952G) as its Singapore Representative and agent for service of process in Singapore. The information provided herein does not constitute financial advice, an offer or recommendation with respect to the Fund. Opinions, forecasts and estimates on the economy, financial markets or economic trends of the markets mentioned herein are not necessarily indicative of the future or likely performance of the Fund. The Fund may use financial derivative instruments for the purposes of investment, efficient portfolio management and/or hedging.
Investments in the Fund are not deposits in, guaranteed or insured by the Manager and involve risks. Past performance of the manager or sub-manager is not necessarily indicative of its future performance. The value of units in the Fund and any income accruing to them may fall or rise. Past performance of the Fund is not necessarily indicative of future performance. Investors should read the Singapore prospectus, and seek advice from a financial adviser before deciding whether to purchase units in the Fund. A copy of the Singapore prospectus and the product highlights sheet can be obtained from Manulife or its distributors. In the event an investor chooses not to seek advice from a financial adviser, he should consider whether the Fund is suitable for him.
Distributions are not guaranteed. Investors should refer to the Singapore prospectus for the distribution policy of the Fund. The Directors of the Company shall have the absolute discretion to determine whether a distribution is to be made in respect of the Fund as well as the rate and frequency of distributions to be made. Distributions may be made out of (a) income, or (b) net realized gains, or (c) capital of the Fund, or (d) gross income while charging all or part of the fees and expenses to capital, or (e) any combination of (a), (b), (c) and/or (d). Past distribution yields and payments are not necessarily indicative of future distribution yields and payments. Any payment of distributions by the Fund is expected to result in an immediate decrease in the net asset value per share of the Fund.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
2. Bloomberg, as of 30 April 2020. Among the eight major Asian currencies (Singapore dollar, Chinese renminbi, Indonesian rupiah, Indian rupee, South Korean won, Malaysian ringgit, Thai Baht, and Philippine peso), Singapore dollar has the second-lowest volatility (standard deviation) at 5.58% p.a. against US dollar over 20 years to April 2020.
3. Bloomberg, as of 30 April 2020. Among the eight major Asian currencies (Singapore dollar, Chinese renminbi, Indonesian rupiah, Indian rupee, South Korean won, Malaysian ringgit, Thai Baht, and Philippine peso), Singapore dollar was ranked second during the Global Financial Crisis (March 2008–March 2009) and fourth during the market sell-off due to COVID-19 (March 2020), with returns against US dollar of -10.6% and -2.07% respectively. Past performance is not an indication of future results.
4. Moody’s Investors service, S&P, and Fitch, as of 8 May 2020.