Kames' Buckle: CoCos face 'substantial' price falls

A sharp rise in the value of subordinated bank debt means the likes of contingent convertible securities (CoCos) face a sharp mean reversion in future, according to Kames Capital's Iain Buckle.

Buckle, co-manager of the £660m Kames Sterling Corporate Bond fund, has divested from the asset class entirely after becoming "increasingly sceptical" about the sector. That follows a sharp rally for additional tier 1 debt and similar instruments last year, as a wave of issuance by banks looking to boost capital ratios to meet regulatory requirements was snapped up by investors. This buying was driven by the attractive yields on offer from the likes of CoCos, which convert automatically into equity instruments should a bank get into financial difficulties. But Buckle said he has yet t...