Asset managers are expected to step into the synthetic collateralized debt obligation market to manage deals this year as a way to increase assets under management and fees. This trend took off last year when several asset management giants including Pacific Investment Management Co. (PIMCO) (DW, 6/29), Barclays Global Investors (DW, 5/19) and the Trust Company of the West (DW, 2/10) managed their first synthetic offerings. Many others, including State Street Global Advisors (DW, 5/13), started considering the move.
Anthony Thompson, managing director, ABS strategy and head of CDO research at Deutsche Bank Securities in New York, said asset managers have been attracted to managing synthetic CDOs to increase their assets under management. This has been especially important in the last year as the number of loans being priced has fallen. For many asset managers, selection of credits is a natural extension of their stock picking abilities, added another CDO researcher.
In September, PIMCO offered its first managed synthetic offering, a USD1 billion deal dubbed Channel, which invested 90% in credit-default swaps and 10% in bonds. Later in the year the fund manager also brought to market a USD120 million synthetic emerging market managed CDO, with the Newport Beach, Calif.-based manager expecting to launch more hybrid CDOs this year (DW, 11/24).
Barclays Global Investors made inroads across two continents last year, with CDOs being planned for both the U.S. and Asia. In May, the firm's San Francisco-based staffers started preparing a deal. But it was recently shelved because of the current harsh enviroment for issuing CDOs of between USD500 million- USD1 billion (DW, 5/19). Meanwhile colleagues in Hong Kong were developing a USD1 billion arbitrage CDO, referenced to liquid Asian credits as well as global names to increase diversity, said Rick Ng, director and head of sales for fixed income and structured products (DW, 3/17).
