The huge potential increase in contingent convertible bonds issuance has led Henderson Global Investors to add resources to specifically cover the asset class.
The firm’s head of global credit, Stephen Thariyan, revealed this renewed focus in an investor update.
His comments come in the wake of a large increase in appetite for contingent convertible bonds, widely known as CoCos, which are expected to rise in significance as the European banking sector begins to delever.
‘The European banking market needs to raise about €40 billion in 2014 in tier securities alone for leverage ratio reasons. We estimate around a third of that will come through additional tier one notes CoCos,’ Thariyan said.
Citywire A-rated Thariyan said Henderson is now also responding to this increased need for fund managers to dedicate time and manpower to cover this area.
‘We need to look at the names we like and the ones with an additional tier one market and invest accordingly. There has been quite a lot of activity already, we have taken part in many and those have done well. There is quite a high active beta, so if the market sells off you reason they will be hit first.’
‘It is very much on a case by case basis. They are complex, they are difficult, so we have actually added staff to look at the analysis of all these securities,’ he said.
Commenting on existing investments, Thariyan said the tea has added a number of CoCo holdings, which have performed well for the firm.
The addition of staff resources to the credit team is the latest in a series of changes at the group, which recently hired former F&C partner Stephen Drew to the role of head of emerging market credit earlier this month.