As described in other sections, Flaherty & Crumrine manages portfolios for publicly traded closed-end funds and a variety of clients, including Fortune 100 companies, insurance companies, privately held companies, nonprofit foundations and utility Nuclear Decommissioning Trusts (NDT's).
Our clients include those able to take advantage of the inter-corporate dividends received deduction (DRD), and those seeking the higher pre-tax yield of taxable preferred securities. Because of their high pre-tax and after-tax yields, preferred securties are especially attractive to companies concerned with the Alternative Minimum Tax. Most accounts own a diversified portfolio consisting of both DRD eligible (traditional) preferred securities as well as fully-taxable preferred securities. Even for clients most interested in after-tax returns, it may make sense to shift the allocation between traditional and fully-taxable securities as one market cheapens/richens relative to the other. For accounts more interested in pre-tax returns, a portfolio of higher yielding hybrid preferred securities is usually appropriate, although the allocation can change as described above.
In addition to the distinction based on tax preference, our clients also vary in the amount of interest rate risk they are willing to tolerate. Exposure to interest rates is managed through the use of interest rate management tools. This allows us to seek to tailor the portfolio to the client's specific risk tolerance.Flaherty & Crumrine manages four U.S. closed-end preferred stock funds. The Flaherty & Crumrine Preferred Income Fund and the Flaherty & Crumrine Preferred Income Opportunity Fund; both invest in a mix of traditional and fully-taxable preferred securities. The Flaherty & Crumrine/Claymore Preferred Securities Income Fund invests primarily in fully-taxable preferred securities, and the Flaherty & Crumrine/Claymore Total Return Fund invests in a mix of fully-taxable preferred securities and senior debt securities. The Funds employ a combination of hedging and leverage to create an income stream that has increased in periods of rising rates, but has been relatively resistant to declining rates. The Funds are listed on the New York Stock Exchange under the symbols PFD, PFO, FFC, and FLC, respectively. Additionally, Flaherty & Crumrine manages a portfolio for the Flaherty & Crumrine Investment Grade Fixed Income Fund which trades on the Toronto Stock Exchange under the symbol FFI.UN. For detailed descriptions and further contact information, please visit their respective websites at:
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