FFC - FFC: Leveraged Bank Preferred Equity In Need Of Lower Rates
2024-04-08 04:01:36 ET
Summary
- Flaherty & Crumrine Preferred and Income Securities Fund holds a portfolio of bank and insurance preferred equities, with financials representing the highest risk.
- FFC has a high leverage ratio of 39% with a cost of debt over 6%, which has been a drag on performance.
- The fund's performance is highly dependent on the direction of interest rates, and it is expected to underperform in a high rates environment.
- FFC acts as a magnifying glass on the preferred equity space, and is in dire need of a lower rates environment in order to outperform.
- The CEF holds preferred shares issued by the New York Community Bancorp.
Thesis
We covered the Flaherty & Crumrine Preferred and Income Securities Fund ( FFC ) more than a year ago, right before the March 2023 regional banking crisis. At the time rates had moved significantly lower, and a CEF investing in preferred equity with leveraged seemed an interesting idea to explore....
FFC: Leveraged Bank Preferred Equity In Need Of Lower Rates