When the best term deposit rate you can get is below 1 per cent from a bank you may never have heard of, the chance to get 4 per cent or better on a hybrid security from one of the big four tends to grab your attention. The problem is, of course, those attractive rates come with all kinds of strings attached.
After emerging 25 years ago as a handy solution for companies to raise money and for share market investors to be able to access higher-yielding securities, hybrids have become an entrenched part of the Australian market. But while they can readily play a role in a smart investor’s well-structured portfolio, they are devilishly complex.