SGAM Alternative Investments is set to manage a capital protected credit-default swap portfolio structured by Barclays Capital. The subsidiary of EUR31 billion asset manager Société Générale Asset Management will use a variation of constant proportion portfolio insurance called dynamic portfolio insurance to protect capital invested in the long/short fund.
Heikki Monkkonen, managing director in structuring at Barclays in London, said the transaction has been sold to European insurance companies and banks hungry for absolute return products which are managed. Speaking at the Congress in London, he said the transaction features a long-only bucket which will invest in the most liquid credit-default swaps and credit indices. A second short bucket will follow a market-value strategy and go short credit instruments to mitigate long positions.
The deal, called Kara, is denominated in euros, U.S. dollars and sterling and targets a return of 195 basis points over EURIBOR and 380 bps over LIBOR at a seven year maturity. There will also be notes at five and 10 years. Officials at SGAM Alternative Investments could not be reached by press time.
