The attractions of contingent convertible bonds, or “CoCos,” are numerous, and many of the world’s most sophisticated investors, including pension funds, sovereign wealth funds, insurance companies, private banks and family offices have recognised that CoCos have a potentially valuable role to play in a portfolio.


We believe that CoCos deserve a place in a broad range of portfolios and that now may be an ideal time to consider allocating to these versatile instruments.

What is a CoCo?
  • A CoCo is a type of security issued by banks and insurance companies.


  • They were first issued after the global financial crisis and were designed to help ensure that financial institutions are sufficiently well capitalised.


  • For investors, CoCos are a liquid asset class that can provide a yield comparable and, in some cases, better than high yield bonds but with a generally lower degree of credit risk, given the quality of CoCo issuers. CoCos’ volatility is also substantially lower than bank equity, and Coco coupon payments have so far never been cancelled.
A stop sign with the word 'Bonds' on it against a backdrop of stacks of coins and chart
Highlights of CoCos
  • Designed after the financial crisis, with input and involvement from regulators
  • A more cost-effective way for banks to raise capital than issuing new equity, hence the attraction for issuers
  • Highly attractive yield, relative to the credit quality of the issuers
  • Markedly lower realised price volatility than bank equity and historically better returns
  • Issuance is reaching a peak and the market has probably reached a more mature phase
  • Conversion triggers are set at very low capital levels and therefore are very unlikely to be reached unless a bank is already not viable
  • In the last 10 years, banks have seen a significant improvement in their fundamentals, with reduced leverage, better asset quality and much stronger capital positions
Reasons to consider an actively managed CoCo fund

Anecdotal evidence shows that some investors are unnecessarily avoiding holding CoCos because they believe they may be in intrinsically more complex than other instruments they are perfectly happy to hold.

We would argue that CoCos are, in reality, not much more complex than a normal callable bond – an instrument many fixed income investors would hold without giving the matter so much as a second thought. Indeed, more complex than the instruments themselves is the field of banking regulation – in itself, a strong case for choosing an active CoCo fund, run by managers with a deep understanding of bank capital structures and banking regulation.


Yield, glorious yield!
When yield accounts for such a high proportion of total investment returns, are you missing out on one of the most attractive yielding assets currently available? CoCos offer a yield superior to other fixed income instruments, but with comparable volatility.
Quoted yields are not a guide or guarantee for the expected level of distributions to be received. The yield may fluctuate significantly during times of extreme market and economic volatility. Source: Factset, Bloomberg. As of 03.31.22. Volatility run weekly annualized from inception (08.16.2017) to 03.31.22, fund share class I USD (Inc). Yield is USD Hedged yield to maturity for fund and fixed income indexes, USD hedged dividend yield for equity index. Bank equity is Euro Stoxx Banks Index, Non-Financials Global Corporate High Yield is IXE BoFA Non-Financials BB/B DM High Yield Index, Non-Financial Global Corporate Investment Grade Index is ICE
BoFA Global Non-Financials Corporate Index.

A great diversifier

CoCos have a relatively low, or negative, correlation with a number of key asset classes, giving an allocation to them the
potential to enhance overall portfolio diversification.

Source: FactSet as at 31.03.22. Correlation is with Bloomberg Barclays Contingent Capital Western Europe (USD Hedged), 31.05.14 toi 31.03.22. *Bloomberg Barclays US High Yield – Corporate (USD Unhedged) Index. S&P 500 Total Return Index, Euro Stoxx Banks USD, US Treasury Total Return USD.
Investment approach
The fund has a robust, structured and repeatable five-stage process. Its aim is to select the highest quality and best-value issuers, which in the manager’s opinion have the strongest balance sheets and capital generation characteristics.

Meet the team

Fund manager Luca Evangelisti has been involved with contingent convertible bonds since the early days of their inception. In addition to managing the Jupiter Financials Contingent Capital Fund, he is Head of Credit Research in the fixed income team, which is headed by Ariel Bezalel. Luca is also manager of the financials sleeve in the multi-asset strategy headed by Talib Sheikh. In the CoCos fund, Luca is supported by credit analyst Lakshay Thakur; ESG focused analysts Anna Karim and Maiken Anderberg; and investment directors Matthew Morgan and Valerio Angioni. They benefit from collaboration across Jupiter’s investment teams, including fund manager and financials equity specialist Guy de Blonay.

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Please note: Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.


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This communication provides information relating to Jupiter Financials Contingent Capital Fund (the “Fund”), which is a sub-fund of Jupiter Asset Management Series plc. Jupiter Asset Management Series plc is an investment company with variable capital established as an umbrella fund with segregated liability between sub-funds which is authorised and regulated by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended. Registered in Ireland under registration number 271517. Registered office: 33 Sir John Rogerson’s Quay, Dublin 2, Ireland.