Fresh scrutiny on CoCo bonds: Wealthy families advised to tread carefully

THE riskiest segment of bank debt, called contingent convertible bonds or CoCos, is coming under renewed scrutiny among advisers to wealthy families.

Most heads of multi-family office firms contacted by The Business Times said portfolio exposure to banks’ CoCo issuance is zero. Those whose clients have some exposure cite a range of 2 to 4 per cent. They also have no exposure to Credit Suisse’s CoCo debt.

CoCo bonds, which are Additional Tier-1 (AT1) in banks’ capital structure, were widely recommended by some private banks – even as recently as January and February – due to their higher yields. Private banks have declined comment.