In this episode, the ReSolve team is joined by Brian Moriarty, Associate Director of Fixed Income at Morningstar Research Services, and Dave Nadig, Chief Futurist at VettaFi Financial, to discuss the recent demise of Credit Suisse and the complexities of capital structure in banks. They explore various topics, including:

 

• The persistent overweight of fixed-income mutual funds in financials, and in particular, banks

• The impact of the 2008 global financial crisis on the capital structure of banks and the regulations put in place

• The fertile hunting ground for active managers in the complex capital structure of banks

• The Credit Suisse trade setup and its implications for fixed-income portfolios

• A comparison of capital structures between regulated banks and traditional US corporates

• The unique contractual clauses and outcomes of European and US preferred shares, specifically contingent convertible bonds (Cocos) and Tier 1 capital (AT1)

• The nuances between Swiss and other European banks' AT1 and regulatory requirements

• The performance of the capital structure regulations since the global financial crisis

• The importance of understanding the risks and nuances within different levels of the capital structure

• The role of bank counterparties and the potential risks they pose to the stability of financial institutions

 

This episode is a must-listen for anyone interested in banking, capital structure, and the intricacies of fixed-income investing, providing valuable insights and strategies to navigate the uncertain financial landscape and better understand the complexities of banking institutions.

 

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management Inc.

 

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.