Barclays’ institutional investors say no-no to cocos mixed into fixed income indices

Tim Wallace
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BARCLAYS is considering creating a new index for contingent convertible (coco) bonds in a push to attract more investors into the new asset class and ensure demand for the securities becomes well established.

However, investors are thought to be less happy with a previous plan to add cocos to existing bond indices.

The bank is a leader in issuing the debt securities, which convert into equity or are wiped out completely when a lender’s capital ratio falls below a certain threshold.

When that threshold is reached cocos automatically bolster the capital position, bailing in some debt investors.

However, City A.M. understands Barclays initially wanted to include cocos in other existing fixed income indices.

At a meeting with the bank, the majority of institutional investors rebuffed the plan, arguing that mixing the cocos with other debt instruments risks making those existing indices less attractive and less consistent in the type of bonds included.

The bank declined to comment, but is known to regularly review its indices as to reflect market demand.