Invesco lists CoCo and FRN ETFs on SIX Swiss Exchange

Aug 13th, 2018 | By | Category: Fixed Income

Invesco has expanded its offering on Zurich’s SIX Swiss Exchange with the cross-listing of five fixed income-based ETFs and ETF share classes.

Invesco ETFs

Invesco has cross-listed five ETFs or ETF share classes on SIX Swiss Exchange.

The new listings provide Swiss investors with exposure to Additional Tier 1 contingent convertible (CoCo) bonds issued by European banks and to floating rate notes (FRN) denominated in US dollars or euros.

Currency hedging is available on select ETFs.

CoCo bonds

The Invesco AT1 Capital Bond UCITS ETF (IAT1 SW) tracks the Markit iBoxx USD Contingent Convertible Liquid Developed Market AT1 (8/5% Issuer Cap) Index which focuses on the US dollar-denominated AT1 contingent convertible (CoCo) bond market – the deepest and most liquid in which European banks issue AT1 bonds.

CoCos include a mechanical trigger that can write-down the value of the bond or convert it to common equity based on the issuing firm’s level of capital. The bonds generally offer higher yields than investing in senior bank debt and may offer some mitigation to rising interest rates.

The underlying index aims to offer a broad coverage of the AT1 USD capital universe, whilst upholding minimum standards of investability and liquidity. The weight of the top five holdings is capped at 8% and the remaining holdings capped at 5%.

The fund was first launched in June, on London Stock Exchange under the ticker AT1 LN. Since then it has accumulated assets under management of $50m. It is also available to trade on Borsa Italiana.

A euro-denominated, currency-hedged share class has also been listed under the ticker XAT1 SW.

Floating rate notes

The three FRN ETFs offer access to notes issued by corporates in either US dollars or euros. FRNs offer coupons that adjust to reflect changes in interest rates, compared with traditional bonds which pay fixed coupons.

The Invesco USD Floating Rate Note UCITS ETF (UFLT SW) and euro currency-hedged Invesco USD Floating Rate Note EUR hedged UCITS ETF (UFLE SW) track the Bloomberg Barclays US Corporate FRN 500 MM Liquid Bond Index. They trade in US dollars and euros respectively and have TERs of 0.10% and 0.12%.

The Invesco EUR Floating Rate Note UCITS ETF (EFNT SW) which tracks the Bloomberg Barclays Euro Corporate FRN 500 MM Liquid Bond Index. It also trades in euros and has a TER of 0.12%.

To be eligible for inclusion in the underlying indices, FRNs must have a minimum issuance of $500 million (or €500 million) and have at least 2.5 years remaining to maturity when they are issued. Constituents are weighted by market value, while issuer exposure is constrained to 5% of the total index weight.

The funds, which were initially rolled out on London Stock Exchange and Xetra in May 2018, are physically replicating.

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