Robeco Alternative Investments is planning to launch an innovative collateralized debt obligation in November, which will be actively managed to offer investors some short-term credit exposure. The portfolio will invest around 50% of assets in credit-default swaps with an average maturity of two years. The rest of the portfolio will be invested in longer-dated default swaps and cash. Edwin Noomen, v.p. in Rotterdam, explained the product would have less sensitivity to spreads widening and would appeal to Robeco's high-net-worth clients who are looking for spread income.
Robeco will likely issue between EUR250-300 million (USD304-365 million) worth of notes, but the portfolio size will be dynamically managed. Noomen said the portfolio will be highly leveraged at around seven or eight times initial investment, compared to four or five times for a usual CDO. "If we had losses in the future, we would bring down the leverage," noted Noomen.
