Meet the Active Manager: Understanding Preferred Shares with Jay Hatfield

Published Date: August 20, 2026

Author: HANetf

With income remaining an important consideration for investors navigating changing interest-rate conditions, preferred shares can offer a distinctive blend of income and equity-like characteristics. Jay Hatfield, CEO and CIO of Infrastructure Capital Advisors, discusses the role preferred securities can play in income-focused portfolios, the importance of active security selection and where he sees opportunities across preferred, hybrid and other income-generating securities.

Key Topics:

Income-focused infrastructure investing
Infrastructure Capital’s core philosophy is generating substantial monthly income through infrastructure-style investments, with around two-thirds of assets in fixed income rather than equity-based income strategies.
Higher-yield fixed income over equity income strategies
The focus is on higher-risk fixed income, including bonds and preferred shares, particularly from stable, asset-intensive “old economy” companies. The aim is to generate attractive income while remaining senior to common equity.
Preferred shares as an attractive asset class
Preferred shares are presented as offering potentially equity-like returns with lower volatility, supported by coupons in the roughly 7–9% range and greater protection because preferred shareholders rank ahead of common shareholders.
Public-company preferreds versus private credit
The strategy favours preferred securities issued by listed companies. The argument is that public companies generally have greater transparency, access to equity markets and more options to protect their creditworthiness than private companies.
Lower inflation, Fed rate cuts and a supportive macro backdrop
Infrastructure Capital expects US inflation to decline, potentially allowing around three Fed rate cuts. Falling rates alongside a strong equity market could favour higher-risk fixed income through declining yields and tighter credit spreads, particularly for preferreds and high-yield bonds.

Transcript:

Thanks for having me on. I’m the CEO and founder of Infrastructure Capital. I’ve been on Wall Street for 37 short years after I graduated from Wharton with a degree in finance. About half that time being an investment banker, mostly at Morgan Stanley, working at large hedge funds. And then 17 years ago I founded Infrastructure Capital. We have seven ETFs, six here in the US, one in Europe.

All of them are focused on monthly income and are infrastructure type investments. Two-thirds of our assets are in fixed income, and we do think that that’s a critical distinction for investors. So a lot of investors will say, oh, I get great income by this micro strategy call writing, and they get 82% income, but their total return is negative 18.

We’re focused on primarily fixed income, and we like higher risk fixed income. So lower risk than equities, but higher risk. So we have a bond fund and a preferred stock fund. And most of the bonds and preferred stock we hold are in old economy type companies. So they’re more stable, they’re asset intensive, they have lower default rates. So that’s our core philosophy. Generate substantial lower risk income from infrastructure style investments and even better, senior to common, either bonds or preferreds.

We think so. We spend a lot of time on macro analysis, and I’d recommend, even if you aren’t interested in our ETFs, looking at our data on our website, it’s very unusual proprietary. And we’ve had great track record of making forecasts. So we’re forecasting a strong stock market in the US, which probably means the rest of the world as well, at some level, at least, maybe better than the US. And also declining interest rates for one and only one reason, which is that inflation is very, very likely to decline. We have that forecast on our website.

So that’s a great market to invest in fixed income generally, but if the stock market’s strong, you should get a tightening spread. So the higher risk portion of fixed income, like high yield bonds and preferreds, normally do outperform when the Fed or the central bank’s cutting rates and long term rates are going down slightly and the stock market strong.

So preferred shares are fixed income in the way we look at it, specifically because they’re senior to common, and they don’t participate in the upside of the common, and they get paid first. And we do think it’s a very, in addition to the macro environment, a great asset class, because we exclusively focus on preferreds that are issued by public companies.

And there’s been a lot of concern about private credit in the US. And we think some of those concerns are relevant. Private companies are fundamentally riskier than public companies, they can’t issue equity, they don’t have to report to the SEC. So we think preferreds are very attractive asset class.

The preferreds we buy are also listed, but more importantly, the issuers are listed. They’re substantial market caps, they care about their credit, they will do whatever it takes to maintain their credit, issue equity, sell assets, stop paying common dividends, but not preferred.

So I’d recommend the asset class to anyone, and you can buy them individually, you can use our ETF, you can use other ETFs, but a great asset class for almost any investor, because you get almost equity-like returns with lower volatility. So the coupons are in the 7–9 range, that’s almost equivalent to an equity type return, but you get more safety because you’re senior to common.

Well, what we’d love is to in effect arbitrage the rating agencies in the US. So they’re pretty old school, so they don’t like preferreds, they notch them three times, so full rating category. So if it was triple B, it’d be double B. And we think that doesn’t make any sense for strong credit.

So we’d look for investment grade bond issuers, but non-investment grade for stock issuers who get really low default rates, but quite good yields. And so it’s a way for us to take advantage of the fact that the rating agencies are inefficient in our view.

I alluded to it before, but in the US, our Fed is obsessed with core PCE. But we see it rolling down after February. We printed 0.5 last year, so it’s just arithmetic, we’re likely to print 0.2, 0.3. So you’re going to see a 0.2 to 0.3 decline in year-over-year inflation, that should pave the way for three rate cuts in the US.

Lower rates could be supportive for the global economy, because US monetary policy often influences other central banks. So that’s the core of our view — lower inflation and potential Fed rate cuts.

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Meet the Active Manager: Understanding Preferred Shares with Jay Hatfield

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