Tokyo-Mitsubishi Asset Management is looking at using credit derivatives for its JPY500 billion fixed income portfolio for the first time. Takayuki Amano, head of fixed income in Tokyo, said the fund intends to study credit derivatives in greater detail as an alternative product to plain-vanilla bonds, but noted it will likely take over 12 months before it pulls the trigger on any contracts. "We don't have much of an idea of the products yet," said Amano. Since credit derivatives are marked-to-market it would be difficult for the fund to trade the instruments until it has a firmer understanding of the product and how to evaluate them, he explained declining to elaborate. Amano declined to comment on potential counterparties.
The fund manager, which is part of Japan's Mitsubishi Tokyo Financial Group, with over JPY1 trillion (USD8.3 billion) in assets, watches default-swap spreads on the back of its bond holdings and is reviewing historical data and structures provided by the asset manager's sister firm, Bank of Tokyo-Mitsubishi. The growing liquidity has prompted the asset manager to consider the instruments. Amano said the group would likely need approval from the cio to introduce the new product, but Amano does not plan to seek approval just yet, preferring to get up to speed on the products first.
"There's a lot of tire-kickers out there but if they start trading it will be a very positive development," said one credit head in Japan. He treated the news with caution as several firms, including Sumitomo Mitsui Asset Management, have started eyeing credit derivatives but have not yet started executing deals.
