Washington Square Investment Management is looking to structure and manage a synthetic CDO in which a chunk of the underlying portfolio is emerging market corporates. "Between 30% and 40% will be actively traded on an emerging market basis," said Miguel Ramos, managing partner in London.
Washington Square focuses on non-traditional credit issuers and invests heavily in researching the credit risk of underlying entities, Ramos said, adding his firm is well equipped to select and manage emerging market names. "The corporates we have chosen in countries including India, Mexico and Russia are in very specific situations," he explained, adding the target average credit spread of these corporates is 100-125 basis points. The remainder of the fund will comprise more conservative, less volatile names with a target median spread of 30bps.
Ramos said the deal will be marketed to investors globally, noting preliminary discussions have drawn interest from Asian and European investors, as well as private U.S banks. The trade counterparty has yet to be selected, but Ramos said he will base the decision on a ability to fine tune and market the combination of high and low yield assets. "To actually sell the paper is very important," he said. The structure and target notional of the CDO has not been finalized.
Washington Square was launched in 2003 and currently manages Wakefield Tower, a EUR580 million (USD708 million), single tranche synthetic CDO of investment grade, high yield, sovereign and emerging securities. It was a follow-up trade to the EUR500 million (USD610 million) White Tower CDO which was launched in 2003 and was unwound to realize gains in February.
