Hugh Evans, former co-head of global credit derivatives at UBS Warburg in London, has joined an old school friend to set up a credit derivatives arm of a London-based credit broker. The brokerage, named Brains, was originally intended to broker strategies but has been running a cash credit brokering arm since its inception in 1998, according to founder Jon Hunter in London. Evan's role will be to develop structured product ideas as well as a flow business.
A head of exotic credit derivatives trading said if the broker can structure a couple of innovative products it can build a franchise that could be a success.
Evans, who started last week, said his first role is to develop a credit derivatives brokering arm which will give the firm a steady stream of revenue. But he will also use his expertise in the mechanics of derivatives to come up with structured products. The firm cannot take risk itself because it is a broker and therefore plans to approach a derivatives house to structure the instruments, which will then be sold through its network.
Structuring products used to be strictly the domain of global derivatives houses, however, as these institutions have started to place value on their balance sheet 'freelance structurers' can do the same, according to Evans. "Balance sheets are readily available for good ideas," he added.
Evans said he joined the brokerage because a small institution is more about products than management. "If you are confident in your ideas this is the place to do them," said Evans. He left UBS last March (DW, 3/4/02).
ABN AMRO, Deutsche Bank
Plan iBoxx Swap
ABN AMRO and Deutsche Bank plan to separately launch identical unfunded swaps referenced to the iBoxx index, a European fixed income index jointly complied by seven market makers. The two firms are going to be joint market makers in the swaps, meaning that they will both make prices for investors, to offer more transparency and liquidity, according to officials at both firms.
The swap will offer investors synthetic unleveraged exposure to the note via a credit-default swap. Aurelia Lamorre-Cargill, co-head of interest rate structuring at Deutsche Bank in London, said investors that are looking to short names in the index might prefer to use this unfunded version rather than the funded note the firms already offer.
The swaps will have a five year maturity, denominated in euros and will be launched every six months with a re-balanced underlying portfolio based on corporates' current duration-adjusted market capitalizations. Both firms independently launched iBoxx-based CLNs last year (DW, 7/1, 9/8).
