The buyside arm of Bank of Montreal, BMO Nesbitt Burns, with USD7 billion in assets under management, is considering investing in its first synthetic collateralized debt obligation, according toIan Clare, v.p. and portfolio manager in Toronto. Clare declined further comment. However, an official at the firm said it has been planning a possible foray into the burgeoning North American synthetic market for several months. He added that a decision about how much BMO will invest in the synthetic venture has yet to be determined.
The group which currently invests in four cash CDOs sees entering the synthetic market as a natural progression of its philosophy to generate returns through a diversified portfolio. A market official familiar with the group's plan said the asset manager is likely to invest in an actively managed CDO with a portfolio referenced to at least 100 U.S. corporates. He added that the group would likely look to invest in the AAA rated tranches of the CDO. "The key for this group is diversification."
