Invesco AT1 Capital Bond UCITS ETF GBP Hdg Dist
| Issuer: Invesco |
| Asset Class: Fixed Income |
| TER: 39bps |
| Trading Currency: GBX |
| Pays Income: False |
| Listing Date: 28 Sep 2018 |
| Ticker: AT1S |
| ISIN: IE00BYZLWM19 |
This investment vehicle provides exposure to the global market of US dollar-denominated Additional Tier 1 (AT1) contingent convertible bonds, commonly known as CoCos. These are hybrid debt instruments issued primarily by financial institutions to meet regulatory capital requirements. The strategy aims to replicate the performance of a benchmark index comprising liquid AT1 bonds from developed market issuers. A key feature of this specific share class is its currency hedge, which is designed to mitigate the impact of fluctuations between the US dollar (the currency of the underlying bonds) and the British pound.
This product is tailored for investors seeking higher yields than those typically available from traditional corporate or government bonds. AT1 CoCos offer attractive coupon payments to compensate for their unique risks, which include the potential for coupon suspension or conversion into equity if the issuing bank's capital levels fall below a predetermined threshold. It may appeal to those with a higher risk tolerance and a constructive view on the stability and capitalization of the global banking sector. The currency-hedged nature makes it particularly suitable for UK-based investors looking to access this asset class without taking on direct currency risk.
The primary risks associated with this investment are linked to the subordinated nature of AT1 bonds. In a stress scenario for an issuing bank, these bonds are designed to absorb losses before senior debt holders, which could lead to a partial or total loss of capital. Investors should also be aware of interest rate risk, as bond prices generally fall when interest rates rise. While the fund is diversified across numerous issuers and geographies within the developed world, its concentration in the financial sector means its performance is closely tied to the health of the banking industry.
