How to assess the risk
If you are considering hybrids as an investment, find out the answers to these questions from your financial adviser or the prospectus, advises ASIC.
What are the risks of investing in this hybrid security, now and in the future?
Will the returns offered adequately compensate for the investment risk?
How does the interest rate compare with other investments on a “riskadjusted” basis? Can other less complex, less risky or long-term investments provide a similar or better return?
Does the issuer have to pay interest? If they don’t, do missed payments accumulate?
What is the maturity date? Can the issuer repay the investment early, or leave the hybrid on issue for a very long time?
Are there any trigger events (such as “loss absorption” or “nonviability”) where your hybrid may convert into ordinary shares, or be written off completely?
Will this product help you achieve your personal goals? Does it suit your investment time frame and personal risk profile?
Can you exit this investment if your circumstances change?