The prudential regulator’s plan to phase out bank hybrid securities and replace them with capital it regards as cheaper and more reliable could force hybrid investors into riskier investments such as shares, bond fund managers say.

Hybrids are a combination of debt and equity that pay investors a set rate of interest, but can be converted to shares or even written off entirely in times of balance sheet stress. They rose to prominence when Credit Suisse’s hybrid holders were wiped out in the Swiss bank’s forced merger with UBS.