CoCo bond (contingent convertible)
“CoCo” and “AT1” are used almost interchangeably in market commentary, and for most practical purposes that is fine. The distinction is one of category versus classification. Contingent convertible describes the mechanism: a bond whose terms change contingent on an event — conversion into shares, or a write-down of principal. Additional Tier 1 describes the regulatory role: an instrument that counts towards a bank’s AT1 capital requirement under Basel III, which imposes specific conditions (perpetual maturity, discretionary coupons, a loss-absorption trigger).
Why the vocabulary matters to an ordinary investor: fund factsheets are inconsistent. One fund lists “contingent convertible bonds”, another lists “AT1”, a third writes “hybrid financial capital”. All three can mean exposure to the same write-down mechanics that the viability event trigger describes. If any of these words appear in a fund’s holdings, the position can go to zero while the issuing bank’s shares are still trading.
That is not a reason to avoid them — it is a defined risk paying a defined premium. It is a reason to know the word list when you read a factsheet: “AT1”, “CoCo”, “contingent convertible”, and to check whether the fund’s mandate says senior debt only.
Where this shows up on ProfitOwl
Credit Suisse AT1 Bonds: How CHF 16 Billion Went to Zero
Swiss authorities wrote CHF 16bn of AT1 bonds to zero while shareholders were paid. Here is the clause that allowed it — and how to check if your ETF holds them.
How to Pick an ETF: The Four Checks Institutions Run
The expense ratio is the promised cost, not the delivered one. Four checks a professional runs before buying a fund — and the one that costs Europeans the most.