The Hong Kong Jockey Club, one of the world's largest horse racing organizations with gambling turnover of around USD10 billion, is looking at purchasing credit-linked notes for the first time for its HKD20 billion (USD2.56 billion) investment portfolio. "At the moment we're studying the idea of buying CLNs," said Roger Tang, treasury manager. "We're still at a preliminary stage," he added. It has started looking at CLNs because they have matured into
a proven instrument.
Credit-linked notes would be used as an alternative to investing in traditional bonds. "They're becoming very popular products," said Tang. The member-owned not-for-profit club is speaking with several major investment banks to gain a further understanding of the instruments, according to Tang, who declined to name them. It would most likely purchase CLNs referenced to Hong Kong credits if it goes ahead with the plan.
"It's always good to see more people looking at [CLNs]," said a credit derivatives marketer at a bulge bracket firm in Hong Kong, adding that with the low interest rate environment and growing investor education, more corporates are studying credit derivatives.
Tang declined to explain the criteria it would use for deciding whether to purchase credit-linked notes and what it looks for in a counterparty. The Jockey Club previously has used interest rate swaps to hedge bond positions, Tang said.
