TIAA-CREF is planning a major surge in synthetic collateralized debt obligation investment this year, allocating up to 60% of money earmarked for structured credit investment, up from 5-10% last year. Most of that money will be put to work in bespoke transactions the asset manager will manage itself, a new initiative for TIAA, said Keith Ashton, head of structured credit.
As reported by DW sister publication Securitization News, the strategy change was spurred by TIAA's reorganization in October that allows structured credit to better tap research resources across the organization, he said.
Last year, USD500 million was allocated for all of structured credit investment, most of which was put toward cash CDOs. This year's dollar amount is a moving target, Ashton said.
Investing in its own deals will also save the manager money. "Instead of paying other structurers and managers, the view is to keep as much of those economics in the deal as possible," Ashton said. He said TIAA is initially focusing on credit-default swaps on investment-grade corporates, but will eventually expand into other asset types, including leveraged loans, asset-backed and mortgage-backed securities and CDOs.
In October, Sanjeev Handa, head of the asset-backed securities team and lead portfolio manager for three structured finance CDO portfolios, was promoted to head of global public markets. Ashton, previously a nonmortgage ABS portfolio manager, was promoted to head of structured credit, also taking the management lead of the three CDO portfolios. Meanwhile, Iris Bader, a residential ABS portfolio manager, was promoted to co-head TIAA's research and underwriting.
One key result of the change is TIAA will structure and manage its own bespoke CDOs. Previously, the manager invested in deals structured by Street firms or other asset managers. "Now I can go to the research side and say, 'Show me your favorite 100 names,' and we can work together to populate a bespoke portfolio that's informed by our credit views," said Ashton, who will manage the portfolios with his team.
