Fund Management
Old Mutual Global Investors Launches First "CoCos" Fund

The fund will be managed by Lloyd Harris and Rob James, who have a combined experience of over 35 years.
Old
Mutual Global Investors (OMGI), part of Old Mutual
Wealth, has launched the Old Mutual Financials
Contingent Capital Fund, the first
fund in its "CoCos" strategy.
The fund aims to generate a total return through a
combination of income and capital growth from a portfolio of
fixed and variable rate debt securities issued by financial
institutions with minimum capital requirements, such as insurers
and banks, the firm said in a statement.
The fund will typically look to invest at least 75 per
cent in high-quality contingent convertible bonds (CoCos),
with up to 25 per cent in a combination of equity
instruments, collective investment schemes, cash, government or
other bonds.
OMGI said: "CoCos are a form of debt that can convert into equity
or get written down when the regulatory capital of the issuer
drops below a certain level. Created in the wake of the financial
crisis, CoCos were designed to increase banks’ ability to bear
losses beyond their equity buffers. They typically offer a higher
rate of interest than traditional bonds, lower volatility than
European bank equities and can act as a good income diversifier
in portfolios".
The fund will be managed by Lloyd Harris and Rob James.
Harris, who also manages the Old Mutual Corporate Bond Fund, has
10 years’ experience covering the financials credit
sector. James has worked as a financial equity analyst
for over 24 years.
“OMGI’s fixed income funds have invested in contingent capital
for some time, with the team well-experienced in managing these
investments," said Harris. "In our view, there is long-term
value in the asset class; therefore, we believe that now is an
appropriate time to launch a specific CoCos fund. There are very
few opportunities to earn such an attractive yield, especially in
a sector that, post financial crisis, is extremely tightly
regulated. Our robust investment process aims to ensure that only
the strongest, most capitalised institutions make it into the
fund and only the most attractive bonds from those issuers are
included as fund collateral.”