New Zealand's Guardian Trust Fund Management, with over NZD1 billion (USD569 million) in its domestic fixed-income portfolio, is considering purchasing and selling credit-default swaps for the first time in the coming months. "If this can enhance our returns, we'll be happy to go down that road," said Fergus McDonald, head of bonds and currency in Auckland. He continued that the fund is studying the instruments as an additional investment tool for its fixed-income portfolio and that if it goes ahead with establishing systems and preparing documentation, it could be trading within six to 12 months.
McDonald said that if the fund trades credit-default swaps, it will likely be on domestic names. However, he added that the fund would also consider gaining exposure on global credits and then converting it into Kiwi dollars.
Guardian Trust is speaking with a number of potential counterparties to gain a further understanding of the derivatives, said McDonald, declining to single out any firms. He added that it will chose counterparties based on their knowledge, experience, pricing and commitment to the Kiwi market.
