Azimut: a new European fund is born that invests only in hybrid bonds

Azimut, an asset management company, creates the first European fund that invests entirely in hybrid bonds, called Ucits IV. It is a product designed above all for a medium-high range clientele belonging to the independent management sector and which provides for a minimum subscription amount of 25.000 euros.
The fund, according to a Reuters note, will only purchase hybrid bonds with a financial duration at the call of 4 and a half years. But what are hybrid bonds? Halfway between shares and bonds, they have a very long maturity, generally 60 years, and whose recall is decided by the issuer.
Usually the first "call" (call) is set at the fifth-sixth year from the placement, then more often than not other "calls" are set during the life of the bond, at variable intervals depending on the operation, usually every 5 years .
Hybrid bonds are certainly a higher cost for the issuer, but they are still more convenient as they are protected from rating agency downgrades as they are only 50% accounted for as debt. They offer an excellent yield, on the order of magnitude of 300 basis points above that of the senior bond of the same issuer. Furthermore, the characteristic of these issues is that - precisely to encourage the issuer to repay the bond on the dates established for the "call" - they carry a "step-up" (coupon increase) that is consistent and increases over time of the coupon in case the call was not exercised.
“We believe that the strong development of this asset class will continue in the coming months and will be increasingly present in the portfolios of private and institutional clients,” said fund manager Stefano Mach.
In Italy this type of experiment had already been launched by Enel - in euros, pounds and dollars - and Telecom Italia in euros. In the Eurozone, the latest benchmark hybrids are those promoted by Iberdrola, the Swiss Alpiq and Edf.