WisdomTree AT1 CoCo Bond UCITS GBP Hedged ETF

Issuer: WisdomTree

Asset Class: Fixed Income

TER: 50bps

Trading Currency: GBX

Pays Income: False

Listing Date: 24 Aug 2018

Ticker: COGO

ISIN: IE00BFNNN459

This investment product provides exposure to the market of Additional Tier 1 (AT1) Contingent Convertible (CoCo) bonds issued by financial institutions in developed European countries. AT1 CoCos are a form of hybrid debt that banks issue to meet regulatory capital requirements following the global financial crisis. These instruments are designed to absorb losses in times of financial stress, meaning they can be converted into equity or have their principal value written down if the issuing bank's capital ratio falls below a predefined threshold. Due to this embedded risk, they offer substantially higher yields compared to more senior forms of bank debt, presenting a potentially attractive income opportunity for investors.

The strategy offers a diversified and liquid route into this specialized segment of the fixed income market. By tracking a benchmark of the largest and most liquid AT1 CoCo bonds, it provides broad exposure to the European banking sector while mitigating some of the liquidity risks associated with individual bond holdings. This approach allows investors to participate in the income potential of the asset class without needing to perform intensive credit analysis on numerous complex securities. This particular share class is also hedged, aiming to minimize the impact of currency fluctuations between the underlying US dollar-denominated bonds and the investor's home currency.

This fund is tailored for sophisticated investors who possess a higher-than-average risk tolerance and a thorough understanding of the unique characteristics of CoCo bonds. The primary appeal is for those looking to enhance the yield of their fixed-income portfolio. Potential investors must be comfortable with the risks, including the possibility of coupon deferral, principal loss, or conversion to equity, which are more pronounced during periods of economic uncertainty or stress within the banking system. The investment is effectively a way to express a positive outlook on the financial stability and continued profitability of major European banks.