WisdomTree AT1 CoCo Bond UCITS ETF - USD Hedged
| Issuer: WisdomTree |
| Asset Class: Fixed Income |
| TER: 50bps |
| Trading Currency: USD |
| Pays Income: False |
| Listing Date: 24 Aug 2018 |
| Ticker: CODO |
| ISIN: IE00BFNNN012 |
This actively managed fund offers exposure to the Additional Tier 1 (AT1) Contingent Convertible (CoCo) bond market. AT1 CoCo bonds are a type of subordinated debt issued primarily by European financial institutions to meet their regulatory capital requirements under Basel III. These hybrid securities possess features of both bonds and equities. They typically offer higher yields compared to senior debt from the same issuer, compensating investors for their increased risk. The fund specifically provides a currency-hedged share class, which aims to mitigate the impact of exchange rate fluctuations between the fund's base currency and the investor's currency, offering a purer exposure to the underlying bond performance.
An investment in this fund may be suitable for those seeking higher income potential within the fixed-income space and who are willing to accept higher levels of risk. The attractive yields on CoCo bonds are a primary draw, driven by their subordination and loss-absorption features. In certain scenarios, such as a bank's capital falling below a predefined threshold, these bonds can be converted into equity or have their principal written down. This product, managed by an experienced team, navigates this complex market by actively selecting securities based on fundamental credit analysis, aiming to identify the most compelling opportunities while managing risk. The currency hedging further refines the investment proposition for investors who want to avoid foreign exchange volatility.
This fund can serve as a satellite holding within a diversified fixed-income portfolio, adding a source of enhanced yield. It allows investors to access a specialized and often hard-to-reach segment of the bond market through a liquid, transparent, and regulated UCITS vehicle. Given the inherent risks associated with CoCo bonds, including extension risk, coupon cancellation, and conversion/write-down risk, it is best suited for investors with a long-term horizon and a higher risk tolerance. The active management approach aims to capitalize on market inefficiencies and mispricings within the AT1 CoCo universe.
