Collateralized debt obligation managers increasingly are moving from cash to hybrid and fully synthetic asset-backed CDOs, panelists said. "I really think the [cash] CDO will be extinct in a couple of years," said Scott Eichel, senior managing director in ABS trading at Bear Stearns in New York.
Hybrid and synthetic deals ramp up faster than cash deals and provide greater flexibility to source collateral. "Traditional CDOs take nine months to a year to ramp," said Darius Grant, managing director at Citigroup in New York. He noted unattractive high-grade deals which started ramping last year are just now coming to market, even though the arbitrage isn't there. "I have no interest in high-grade deals right now," he added. Nunzio Masone, senior managing director at Aladdin Capital Management, added, "As an equity investor and an asset manager, I would 100% of the time take synthetic over cash structures."
