JPMorgan is thought to be the first derivatives house to start marketing a collateralized fund obligation to investors in Asia. The CFO, dubbed Man Glenwood Alternative Strategies I, referenced to USD500 million of hedge fund investments, is being marketed globally but several tranches will be sold to Asian clients in the next two to three months, according to an official at JPMorgan. The manager of the portfolio is Man Investment Products.
"There's an increasing demand for hedge funds in Asia, particularly in Singapore and Hong Kong," added the official, noting that there is now sufficient interest for the nascent product. "This offers diversification and the tranches will be attractively priced compared to other CDOs," he explained.
In the structure, investors will purchase notes on a pool of around 90 hedge funds. The deal is broken down into four rated tranches, Aaa, Aa2, A2, and Baa2 as well as an equity component that will make roughly 30% of the total portfolio. The fund manager will keep most of the equity tranche, noted the official.
A rival structurer said this was the first CFO he had seen marketed in Asia. "This is quite interesting," said another rival structurer, noting that many investors in Asia are still getting up to speed with traditional credit derivative products.
