Portfolio Manager Insights

Finding value in 'digital credit' preferreds

Preferred stocks haven’t been turning many heads lately, but Fidelity’s Adam Kramer is focusing on a small, unconventional corner of the market that he believes is mispriced and offers opportunity.

By: Adam Kramer
Updated: 9/2/2026
  • A little-watched slice of the preferred market – shaped by cryptocurrency exposure, structural advantages and lingering investor skepticism – has created a rare opportunity to capture elevated income with potential upside from a mispriced “digital credit” niche, according to Fidelity Portfolio Manager Adam Kramer.
  • “Preferred stocks have tended to shine when the market has already priced in a lot of bad news,” explains Kramer, lead manager of Fidelity Advisor® Multi-Asset Income Fund. “That’s not broadly the case today, though certain perpetual preferreds issued by cryptocurrency firms stand out to me.”
  • The fund is a flexible, income-oriented strategy that invests tactically across a broad spectrum of income-producing securities, ranging from investment-grade bonds to dividend-paying equities.
  • In helming the portfolio since 2015, Kramer, alongside Co-Managers Ford O’Neil, Ramona Persaud and Rick Gandhi, aims to create a risk profile matching that of the Composite index – a 50-50 split between U.S. equities and investment-grade bonds. They also have the flexibility to go outside the Composite to choose other income-producing asset classes, with the aim of improving the fund’s risk/reward trade-off over a full economic cycle.
  • Kramer points out that preferred shares generally pay a fixed dividend and rank above common stock but below bonds in a company’s capital structure.
  • These characteristics often make preferred shares relatively attractive during so-called “risk-off” markets, although such conditions have not persisted for an extended period in recent years.
  • “Recently, the broader preferred market simply hasn’t offered enough compensation for interest-rate risk, in my view,” he contends. “Yields are low and risk appears underpriced.”
  • By contrast, Kramer sees a compelling combination of factors in certain preferred issues, particularly attractive yields and floating-rate structures that can help reduce interest-rate sensitivity. 
  • This is evident in the preferred shares of fund holdings Strategy, Strive and Bitmine Immersion Technologies – companies that hold Bitcoin or Ethereum on their balance sheets. 
  • Additionally, he notes that these firms’ crypto holdings provide built-in buffers of unencumbered assets that have remained substantial, even after significant price swings in those assets.
  • Kramer also points to the potential for tax advantages. Specifically, distributions paid by some preferreds may be treated as a return of capital rather than ordinary or qualified dividends, which can be a more favorable outcome for the fund.
  • “So why hasn’t the market closed the valuation gap on these securities?” he asks. “I believe skepticism around Ethereum-linked assets has kept many investors on the sidelines, causing these securities to trade at meaningful discounts relative to more-traditional preferreds.”
  • Kramer concludes that such hesitation is exactly where the opportunity lies. Identifying idiosyncratic mispricing is central to the tactical strategy, enabling it to earn a premium yield while the broader market works through its doubts.

Securities mentioned were fund investments as of June 30, 2026.

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Fidelity Advisor Multi-Asset Income Fund (FAYZX)

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