Aladdin Capital Management, a collateralized debt obligation manager with five transactions under its wings, is planning to increase its participation in the structured credit market and is in the process of launching an open-ended credit fund. "It's going to be a long/short credit fund that will gain exposure to credit predominantly through the use of credit derivatives," said Jason Morris, director in structured products at Aladdin. He will be a co-manager for the new fund, which is slated to begin trading in September and has amassed USD50 million of seed capital that will be levered. Morris declined to reveal the name of the new fund, citing securities laws.
The fund will take positions in vanilla instruments, such as default swaps as well as more exotic instruments, including credit options and recovery rate swaps. The bulk of the fund will be in CDS, but by using a wide array of instruments the fund will be able to decompose risk into its constituent parts, he said. As part of the effort, Aladdin recently hired Yi Zhao, a desk quantitative professional from BNP Paribas's credit trading team in New York, as another co-manager for the new fund.
Morris, who joined Aladdin in August of last year from Moody's Investors Service, said the fund will mark new ground for the firm, which has to date limited its exposure to synthetic instruments to 15-20% of its total in its traditional open-end credit funds.
