Principal Global Investors (Australia), part of Principal Global Investors with assets totaling over USD90 billion worldwide, is planning to trade credit derivatives on global reference entities in Australia. "As our fund grows larger we plan to do a lot of interesting things," said Rob da Silva, managing director of Asia-Pacific fixed income in Sydney.
Credit-default and total-return swaps, first-to-default baskets and synthetic collateralized debt obligations are all on Principal's radar screen for its nascent Principal Global Strategic Income Fund as well as for private mandates. The Australian component for the global fund, which kicked off in May, has raised AUD35 (USD26.9 million) in Australia.
Principal is in the midst of a marketing effort. Within a year of receiving larger allocations, da Silva said it could potentially invest up to 10% of its assets in credit derivatives on local names. The U.S. arm has traded credit products as well as managed CDOs. The firm has started talking to banks about executing credit derivatives, but da Silva said it is too early to determine what criteria it will use to select counterparties.
Credit products are gaining further traction in Australia among asset management firms as more obtain mandates for trading, noted da Silva. "More managers are seeing credit derivatives as useful tools and asset consultants are coming to accept their place in a portfolio," he added. Such growth is evident in the recent Australian Financial Markets Association Survey, which saw volumes in credit derivatives rise by some 40% over the past year to total AUD71 billion (DW, 10/22).
