A reminder: what are Hybrids?
A 'hybrid' is an investment that has both equity and debt characteristics - hence the name hybrid. They are similar to equity in that they are frequently convertible into equity at a future date. And they are similar to debt in that they pay interest as would a normal income security. They typically pay interest based on current interest rates (not the profitability of the issuer).
Each hybrid is unique; they have individual terms (for instance time-frame, franking, level of security, distribution payments and redemption method – cash or shares etc). These terms determine their risk (along with the risk associated with the issuer). For instance, we have been cautious (which is polite) in relation to recent hybrid issues from the banks, for instance in relation to their mandatory conversion terms.