Delegates at last week's Information Management Network CDOs & Credit Derivatives conference in New York were tipping collateralized debt obligations referencing a variety of credit securities to gain favor, as fund managers look to play the relative value.
One of the driving factors behind the move toward more diversified CDOs is the battering the ABX has taken over the past month, said panelists. Investors are looking to stay ahead of the game and searching for a more long term approach to analyzing the credit markets as one broad asset class.
"Investors will soon realize you can't just beat up on one part of the market that is going down," said Bleron Barliu, portfolio manager at Red Bank, N.J.-based hedge fund ZAIS Group, during a panel discussion.
Credit players noted another strategy gaining popularity is going long and short the various tranches of full capital structure CDOs referencing both ABS and loans. "If you think a manager is not that great, or you think that certain loans will be called and nobody else understands that, you could buy into the same deal at different parts," said one hedge fund portfolio manager in an aside with DW.
