UniCredit subsidiary launches CoCo bond ETF

Germany’s stock exchange has seen what is said to be the first exchange-traded fund (ETF) that tracks the contingent convertible bond market – a type of debt issued by banks for their regulatory funding requirements.

UniCredit Bank subsidiary Structured Invest, and asset manager Axiom Alternative Investments (Axiom AI), have launched the UC Axi Global CoCo Bonds Ucits ETF, saying it is the first ETF to give a market-weighted exposure to the entire liquid contingent convertible – or “CoCo” – bond market.

Last yearWisdomTree launched a CoCo bond ETF based on issuance by European banks related to their additional tier 1 (AT 1) debt.

The Axiom product taps into the AT 1 debt market and also the restricted tier 1, or RT 1, market.

CoCo bonds are a form of hybrid debt that the banks issue to manage their solvency risk. The bonds can convert to equities or have their principal written down to absorb the issuer’s capital losses.

The latest ETF tracks the euro-hedged Solactive AXI Liquid Contingent Capital Global Market TR Index.

David Benamou, founder and chief investment officer of Axiom AI, said there were reasons to see CoCos as presently attractive.

“The latest bank stress tests showing capital levels in excess of 3% above conversion trigger, coupled with the current upgrade momentum for European banks by rating agencies are both very positive signals for the asset class moving forward,” he said.

©2019 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST