Analyst: Preferred market seen as 'a forgotten space,' does have upside

By Stephanie N. Rotondo

Portland, Ore., Jan. 26 - After going nearly radio silent during the height of the economic crisis, the preferred stock market is showing small signs of life, but the space continues to be challenging, an analyst who monitors the market said.

"Generally, the preferred market is a lot less liquid, a lot less transparent," said the analyst. "It's very challenging to find names that are really tradable."

Additionally, the "variations" to the terms of each preferred issue are such that it can be difficult to follow, he said. By comparison, "the high-yield and convert markets are a lot more standardized."

Though the preferred market has become "a little bit of a forgotten space," the analyst said, it still has a lot to offer.

"It's another way to play the business [inside the capital structure]," he said. Preferred shares tend to have seniority over other securities and offer downside protection. Investors can also see higher yields or excess returns, he noted.

For the time being, however, the market remains muted and will continue to be so until investor interest returns.

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