Traditional long-only credit fund managers have started taking on short exposures in collateralized debt obligations to hedge macro and idiosyncratic credit risks. Dealers and investors on a European CDO panel said short positions are being taken in managed structures including constant-maturity CDOS and credit CPPI.
The rise has coincided with the explosion in managed transactions, which has increased the short component of a standard mezz deal to about 50% from 20%, dealers noted. Declan Tiernan, structured credit marketer at Deutsche Bank in London, said he has seen ABS CDOs with short corporate credit buckets which aim to be market-neutral.
* Whispered wheelings and dealings could be heard in dark corners of the Hotel Arts early in the week, but the meetings were nothing to do with ABS. Negotiations centered on how to score one of the limited tickets to the Deutsche Bank party Wednesday night, where British pop group Girls Aloud had been booked to wow the lucky invitees. It must have been a good knees-up: as DW went to press Thursday, no party attendees could be reached for comment.
