Kanish Chugh from PIMCO, an expert in fixed income and portfolio management, dives into the future of income investing as the hybrid securities market faces changes. He explains why APRA is phasing out bank hybrids, what this means for retirees, and how to adapt investment strategies. The discussion covers the impact of falling interest rates, viable alternatives like bonds and private credit, and how PIMCO is utilizing research to craft resilient portfolios. A must-listen for anyone navigating the shifting investment landscape!
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insights INSIGHT
APRA Is Phasing Out Bank Hybrids
APRA will phase out bank hybrids by 2032 to simplify bank capital and reduce systemic risk.
Existing bank hybrids will not be reissued at first call, forcing investors to redeem when called.
insights INSIGHT
Falling Rates Lower Hybrid Yields
Most hybrids have floating-rate components, so falling cash rates will reduce their income over time.
PIMCO's analysis expects average hybrid yields to decline as cash rates fall in the next 3–5 years.
volunteer_activism ADVICE
Explore Replacements Before Hybrids Mature
Start exploring alternatives now while you have time to redeploy capital before hybrids mature.
Consider fixed-rate bonds for potential price appreciation when rates fall and as a source of income.
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In this Australian Investors Podcast episode, your host Owen Rask sits down with Kanish Chugh (from PIMCO) to discuss:
- The hybrid securities market and why APRA is phasing out bank hybrids
– What income investors (especially retirees) should consider in 2025
– The outlook for fixed income, bonds and private credit as interest rates fall
– PIMCO’s research-backed strategy for income investors post-hybrids
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Topics Covered
– What are hybrid securities and why APRA is shutting them down by 2032
– What this means for income-focused investors and superannuation strategies
– How hybrids work compared to bonds and floating rate securities
– The impact of falling interest rates on income investments
– PIMCO’s research into 38 hybrids and how it’s building portfolios to match risk-return
– Portfolio construction: replacing hybrids with bonds, credit and active income strategies
– How to evaluate ETF yields and how PIMCO builds diversified fixed income portfolios
– Final thoughts on risk, private credit, and doing your research
~~ Episode Resources ~~
– PIMCO hybrid analysis
– Libby Cantrill
DISCLAIMER
This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. You should consider if the information is appropriate for your situation before acting on it.
If you’re unsure, consult a licensed financial planner. The Rask Group is NOT a qualified tax accountant, financial adviser, or tax professional. You can access The Rask Group’s Financial Services Guide (FSG) here.
Australian Investors Podcast