Deutsche Bank is touting managed long/short asset-backed transactions which can incorporate buckets of credit derivatives. "We're seeing good interest for long/short strategies," said Dean Rostrom, managing director in global collateralized debt obligations in Tokyo. Buyers are looking for long ABS exposure, given its yield, but may be concerned about the housing market in the U.S. and so can employ short baskets as a partial hedge. For instance, investors can go long mezzanine ABS while going short a differing ABS mezzanine for a relative-value play, or go short via a synthetic CDO names that would be impacted by a burst in the U.S. housing market such as home builders or financial institutions. Other possible short baskets could include U.S. corporate names via the iTraxx index, if clients believe a fall in the housing market would have a wide-spread effect.
Deutsche Bank has rolled out a handful of the transactions, which the firm believes are a first of their kind for the market. The deals are being handled by prominent ABS managers to give the structure additional flexibility, and are being sold globally on a syndicated basis, noted Rostrom.
