Fisher Francis Trees & Watts, the fixed income management arm of BNP Paribas which runs USD40 billion in assets, is considering launching a capital protected long/short credit fund. The manager would use constant proportion portfolio insurance to protect capital invested in a long/short credit-default swap portfolio it is looking to launch next year.
The CPPI strategy is attractive because it allows a manager to take advantage of changes in credit spreads, said an official close to FFTW. Officials from the group declined comment. "This product is a good survivor and will get through rough weather," she added, noting investors are also showing more interest in the absolute return structure.
The transaction will likely reference a portfolio of credit-default swaps and credit indices. A counterparty firm has not been chosen, but FFTW currently manages synthetic trades arranged with Merrill Lynch, Deutsche Bank and Citigroup (DW, 12/12). De Chillaz said the only foreseeable barrier to the launch of a CPPI transaction would be authorization for the mandate from FFTW management. Transaction size and structure has not been decided.
