UBS Wealth Management Research (WMR) provides investment opinions and regular updates on a universe of preferred securities and a strategic assessment of the relative value in the preferred market.
In addition, WMR analyzes outstanding preferred securities and catalogs the market according to the type of preferred security, level of subordination, tax treatment and country of origin. Similar to other asset classes, educational commentary on basic financial concepts, issues, thoughts and studies are also examined for the preferred securities market. Preferred stocks are subject to market value fluctuations, given changes in the level of interest rates. For example, if interest rates rise, the value of these securities could decline. If preferred stocks are sold prior to maturity, price and yield may vary. Adverse changes in the credit quality of the issuer may negatively affect the market value of the securities. Most preferred securities may be redeemed at par after five years. If this occurs, holders of the securities may be faced with a reinvestment decision at lower future rates. Preferred stocks are also subject to other risks, including illiquidity and certain special redemption provisions. Preferred Stock Ratings System
WMR's rating system for preferred securities is Outperform, Market Perform, Underperform and Sell. Individual securities are rated based on their total return prospects compared to their peer groups. The Sell rating is assigned to preferreds with substantial downside credit or default risk. Our individual security ratings are intended to provide investment guidance for the recommended allocation of preferred securities that investors hold in a balanced portfolio of fixed income securities. They are tailored to suit the investing goals of individual preferred investors and are based on a 12-month time horizon. Our relative value assessment among securities is based on comparisons of preferred securities with similar industry sectors and rating agency categories. UBS Preferred Stock Ratings | UBS Financial Services Rating | Definition and Criteria | Corresponding Rating Category |  |
| Outperform | Securities have potential for outperformance relative to peer group, and the company is likely to meet dividend payment | Buy | | Market Perform | Securities are likely to perform in line with peer group, and the company is likely to meet dividend payment | Hold | | Underperform | Securities have the potential for underperformance relative to peer group, and the company is likely to meet dividend payment | Sell | | Sell | Investors should sell their preferreds in light of substantial downside credit or default risk that raises the likelihood of a deferral or missed dividend payment | Sell |
 |
(186kb)