The chart below shows total returns from May 2014 from a $10,000 investment in each of Crown’s equities, senior bonds (shown as XTBs on ASX), and hybrid securities.
The senior bond XTB returns are extrapolated from May 2015 (when XTBs were launched) back to May 2014, and they include the impact of the XTB Fee (e.g., a 4.4% bond becomes approximately a 4.0% XTB).
Many things can cause hybrid volatility. From a portfolio construction point of view, the key message from the chart is the disconnect, or lack of correlation between senior bonds and the same Issuer’s equity and hybrid.
The case for diversification is clear, as is the message this chart provides about stability of portfolio capital values and total returns in otherwise very trying market conditions.
The chart below shows the Crown XTB and Hybrid in more detail.
More on the Crown Hybrid:
Yield Report featured a story this week on the Crown hybrid. Read the full story on their website. It’s free to register.
Crown’s 13% hybrid yield is not for the faint hearted
In recent weeks YieldReport has highlighted the dilemma facing investors in Crown Resort hybrids as market rumours swirl about a possible privatisation by James Packer. Hybrid investors may well be left worse off and this has caused a large sell-off in Crown hybrids. In a low-yield world 13% is a tempting return but the yield could change if the notes aren’t redeemed at the first call date…