Allianz Global Investors’ February 2026 analysis by François Fabreges evaluates whether hybrid securities can enhance traditional 50/50 equity-bond allocations in a low-spread, high-valuation environment.
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With yields around 5–6% and average BBB ratings, hybrids sit between investment grade and high yield, offering improved income without materially compromising credit quality.
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Portfolio optimisation suggests moderate allocations can lift excess returns and Sharpe ratios with only modest increases in volatility.
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Correlations to equities remain meaningfully lower than high yield, though drawdowns can deepen in crises, underscoring the need for active duration and call-risk management.
Can hybrids structurally improve portfolio efficiency, or do they simply repackage risk? The full paper explores the trade-offs in detail.
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