Hans Günther Bonk, the co-founder of IndexChange, the ETF business of iShares’ German operation, is to launch a new fund which will invest in the subordinated debt and contingent convertibles of banks and insurers.
Bonk, through his Assenagon Asset Management firm, will launch the Assenagon Credit Subordinated Debt & CoCo fund in January, according to Financial News.
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The new find aims to generate returns from subordinated debt and contingent convertibles while buying protection through equity options.
Bonk was quoted by the publication saying: "Under Basel III, banks will have to increase their core equity ratios dramatically until 2018. If you think about the capital structures, we will see higher retained earnings and it doesn’t make sense to pay dividends, pay taxes on it and then ask your equity holders to give the money back."
Bonk added that insurers will also be seeking to strengthen their capital adequacy ratios under the Solvency II directive, which is scheduled to take effect in 2016.
"The founders of the company all came from investment banking. We are very risk-orientated. We are not aiming for the highest return. Instead, we are screening the market for risks where [we] believe the risks are fairly compensated."
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By GlobalDataThe new Credit Subordinated Debt & CoCo fund will have a fee of 0.8% per annum for the institutional share class.
With about 60 employees including a credit team of five people who currently work on the Credit Selection fund, Assenagon Asset Management also manages funds for third parties, including equity and alternative funds for Source ETF.
