As investors continue to search for yield, CoCos, short for contingent convertible bonds, may offer investors exactly that. Created in the aftermath of the financial crisis, CoCos have quickly become a popular choice among investors. But what exactly are they, why are investors drawn to them, and what do investors need to know when investing?
Earlier this week I released a paper entitled, CoCos pop with opportunity…in the hands of a research-rich investor. In the piece, I give a brief background on the creation and appetite for CoCo bonds with the majority of the paper focused on the key attributes to consider when analyzing CoCos. I end by explaining the value they add to any portfolio and how to implement them correctly.
As a teaser, and to add some real color to the value they can add…
In today’s market, the yield to maturity of newly issued CoCos is on average 2.0% higher than that of other subordinated debt and 3.3% higher than that of senior unsecured debt of the same issuer. – sourced from Barclays indices.
Check out the full piece here.
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