Threadneedle Asset Management is likely to use interest rate and credit derivatives for its newly launched fixed-income hedge fund, called the Crescendo Credit Fund. Robert Stirling, head of fixed income at Threadneedle in London, and lead portfolio manager for the fund, said it has the capacity to use any type of over-the-counter derivative. Specifically, it is likely to use interest rate swaps to manage the fund's overall interest rate curve exposure and would also use credit default swaps to hedge credit risk and may use them to take positions.
The managers of Crescendo will use a directional and arbitrage strategy. The fund will have currency and duration limits to prevent it from becoming a global macro arbitrage vehicle, Stirling noted. It has the capacity to use up to 10 times leverage, but is likely to be around three to four times leveraged. Threadneedle will target a return of 10-15% annually.
