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.”