Stonebridge Preferred Income, Series 37
The Stonebridge Preferred Income Portfolio is a unit investment trust that is diversified across preferred
securities issued by companies that we believe have current attractive yields.
Portfolio Selection Process
First Trust Portfolios L.P. (“First Trust”) selected a portfolio of preferred securities by collaborating with
Stonebridge Advisors LLC (“Stonebridge”). Stonebridge used relative value, fundamental credit and
market technical analyses to prepare a recommended portfolio of securities designed to meet the
objective of the trust. Attributes such as credit quality, yield, capital structure positioning, as well as
market technicals such as trading volumes, liquidity and pricing inefficiencies were considered in this
process. Stonebridge submitted its portfolio suggestions to First Trust who then chose the final portfolio.
What Are Preferred Securities?
- Preferred securities are best defined as fixed-income credit products with equity-like features.
- Preferred securities combine many of the characteristics of fixed-income securities — scheduled
dividend/interest payments, defined par amounts and credit ratings with certain characteristics of
equities — perpetual or long-dated terms, lower priority in the capital structure and quarterly
- Preferred securities typically have a yield advantage over common stocks as well as comparably rated
- Preferred securities are "senior securities" which have preference over common stocks, but not debt,
of an issuer.
Why Invest In Preferred Securities?
High Income Stream Potential - Current yields on preferred securities are attractive
relative to many other income-producing securities.
Historically Low Correlations - Preferred and hybrid securities have historically
exhibited low correlations to other income-producing asset classes. The numerous characteristics and
varying structures of preferreds allow for this asset class to be a potential beneficial allocation to a
diversified investment portfolio. Diversification does not guarantee a profit or protect against loss.
Why are New Issues Important?
Newly issued preferred securities are important as they provide liquidity and call protection. We
believe this is important during the current low rate environment we are experiencing.
Why is Call Protection Important?
The securities in the portfolio provide call protection, which helps provide consistent distributions
through the life of the trust. If a preferred security does not have call protection, it can be
“called” or paid off prior to its stated maturity. Call protection is beneficial to investors when interest
rates are low or falling because if the securities are called, there is the risk that the proceeds will
be reinvested at a potentially lower rate of return. The securities chosen for the portfolio have call
protection, which may provide for consistent distributions over the life of the trust.
This unit investment trust seeks a high rate of current income; however, there is no
assurance the objective will be met.
About Stonebridge Advisors LLC
- Stonebridge, an affiliate of First Trust, has an experienced investment team with an average of 15 years
of broad investment experience in fixed income and equities in the areas of portfolio management,
trading, and research. Stonebridge's primary focus is in preferred and hybrid securities.
- Collectively, the Stonebridge investment team members have started two investment management
firms and managed multi-billion dollar portfolios. With the team's advanced portfolio management,
analytical and modeling capabilities, Stonebridge has created a selection of preferred securities
strategies to meet the needs of a wide range of clients.
| Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit
investment trust should be made with an understanding of the risks
involved with owning preferred stocks and trust preferred securities,
such as an economic recession, volatile interest rates and the possible
deterioration of either the financial condition of the issuers of the trust
preferred securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in preferred
stocks and trust preferred securities issued by companies in the
financials sector which involves additional risks, including limited
diversification. The financials sector is subject to the adverse effects of
volatile interest rates, economic recession, decreases in the availability
of capital, increased competition from new entrants in the field, and
the potential for increased regulation. Preferred stocks and trust
preferred securities are typically subordinated to bonds and other debt
instru ments in a company’s capital structure, in terms of priority to
corporate income, and therefore will be subject to greater credit risk
than those debt instruments.
Certain of the securities held in the trust are “high-yield” securities which
are rated below investment grade. Investing in high-yield securities
should be viewed as speculative and you should review your ability to
assume the risks associated with investments that use such securities.
High-yield securities are subject to numerous risks including higher
interest rates, economic recession, deterioration of the high yield
market, possible downgrades and defaults of interest and/or principal.
High-yield security prices tend to fluctuate more than higher rated
securities and are affected by short-term credit developments to a
Certain of the securities in the portfolio are issued by Real Estate
Investment Trusts (REITs). Companies involved in the real estate
industry are subject to changes in the real estate market, vacancy rates
and competition, volatile interest rates and economic recession.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non- U.S. issuers.
As the use of Internet technology has become more prevalent
in the course of business, the trust has become more
susceptible to potential operational risks through breaches in
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The COVID-19 global pandemic has caused and may continue to cause significant volatility and declines in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.
The value of the securities held by the trust may be subject to
steep declines or increased volatility due to changes in
performance or perception of the issuers.
This UIT is a buy and hold strategy and investors should consider their
ability to hold the trust until maturity. There may be tax consequences
unless units are purchased in an IRA or other qualified plan.