Citigroup is preparing to establish a regional hybrid trading desk in Hong Kong on the back of growing interest for cross-product exposure. "These are structures that rely on more than one asset class," said Jeremy Amias, global head of fixed income for Asia-Pacific in Hong Kong, noting they can combine equity with rates, fx, inflation and commodities.
While most firms trade hybrids out of their existing fixed income or equity desks in Asia, some houses including Goldman Sachs (DW, 6/30), JPMorgan and Morgan Stanley have set up dedicated units, noted one Hong Kong headhunter.
The desk will be a stand-alone joint venture between the debt and equity divisions and will report into Richard Burns, global head of hybrid products and equity derivative structured products in London. The firm currently markets products in the region, but relies on other centers for trading. "It's a very similar process to what we've seen for structured rates, CDOs, and credit trading, whereby we initially rely on London and New York and then bring guys over as the business develops." The firm will look to initially have a team of three in place in the next few months.
Hybrid notes can come in a number of forms, for example offering a high, fixed return everyday the FTSE 100 is above a certain number and gold is below a set level. Amias noted CPPI-linked fund-of-fund products will be included in the group's remit, which he expects to be a major focus of the desk.
