Macquarie Bank is gearing up to launch and distribute the first managed synthetic collateralized debt obligation in the growing Aussie retail market in the coming weeks. AXA Investment Managers will manage the deal, dubbed Generator Income Notes. JPMorgan structured the instrument on behalf of Macquarie.
"Basically clients want security on their principle but are still looking for yield, which this delivers," said Gary Vassallo, head of derivatives at Macquarie in Sydney, noting he believes the deal is the first of its kind for the retail space. The principle of the notes is linked to the AAA tranche of the CDO while the income is from further down the credit spectrum and is unrated. "Having a manager adds value and better protects the portfolio against another Parmalat," added Vassallo.
Vassallo said Macquarie also went the managed deal route given the growing numbers of static retail transactions in Australia and noting more static deals could cause significant overlap in investments. Generator Income Notes, the bank's second retail CDO, is referenced to a portfolio of 140 credit-default swaps, which are predominantly linked to U.S. names. It will open to investment this week and close in early December. Macquarie is targeting AUD100-200 million (USD75.5-151.1 million) in commitments.
The Australian retail market kicked off in 2001 with such banks as Westpac Banking Corp., ABN AMRO, and Deutsche Bank since entering the fray.
