Episode 69: The Hybrid Market Shake-Up; Global Shifts; and What’s Next for Aussie Investors?

Oct 29, 2025

Australia's $38.8 billion hybrid market is in decline, raising concerns about global implications. The Credit Suisse write-off sparks a legal fallout, impacting investor compensation. Conflicts of interest arise between shareholders and hybrid holders, complicating the landscape. APRA's decision to phase out bank hybrids is challenged, with critiques on the rationale behind it. What's next? Investors face hidden risks and must consider alternatives like corporate convertibles and private credit as the market shifts.

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INSIGHT

Write‑Downable Hybrids Create Conflicts

Hybrid securities that can be fully written down create perverse incentives for management who are shareholders themselves.
Such hybrids risk creditors being wiped out before shareholders, undermining capital structure priorities.

ANECDOTE

Credit Suisse Write‑Off Sparks Legal Repercussions

Ying Yi notes New Zealand considered phasing out hybrids and mentions the Swiss court ruling against Credit Suisse's hybrid write‑off.
She highlights that the Swiss state may have to compensate investors after a controversial $26 billion write‑off.

ANECDOTE

Warning To APRA Overlooked

Christopher Joye recounts warning APRA about the hazard after seeing Genworth subordinated bond issues.
He says nobody listened, illustrating regulatory inaction to that risk.

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Welcome to the Complexity Premia podcast by Coolabah Capital, a hosted by Christopher Joye, Chief Investment Officer and Portfolio Manager at Coolabah Capital, and Ying Yi, a Senior Portfolio Management Director at Coolabah Capital. The Complexity Premia podcast strives to deconstruct modern investment problems for wholesale (not retail) participants in capital markets. You can listen on your favourite podcast app, or you can find it on Spotify, Podbean or Apple Podcasts.

In this episode, Chris and Ying Yi explore the decline of Australia’s $38.8 billion listed hybrid market and the global implications, including New Zealand’s proposal to phase out hybrid securities and the controversial Credit Suisse hybrid write-off. They discuss the risks and conflicts inherent in hybrid structures, the impact of APRA's decision to phase out bank hybrids, and the emerging alternatives in the market, highlighting the broader implications for both investors and financial stability.

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