“As hybrids are sold into the market, retail investors tend to sell older hybrids (where some of the optionality creates additional uncertainty) in order to buy the newer issues. The result is that the market can oversell, creating opportunities for informed investors.”
Campbell Dawson, Elstree Hybrid management director, said: “We believe the hybrid market offers opportunities for active investors as it is inherently inefficient. It is dominated by retail investors who have a limited understanding of bank and insurer capital issues, and who under and overreact to issuer specific risks and equity market movements. We construct portfolios which seek to benefit from market opportunities and inefficiencies and pass these returns on to our investors”.