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Derivatives

Citi, AXA Plot Credit Fund Re-Run

Citigroup and AXA Investment Managers are planning a second tap of a principal-protected long/short credit fund of single-name credit-default swaps, indices and bonds.

Citigroup andAXA Investment Managers are planning a second tap of a principal-protected long/short credit fund of single-name credit-default swaps, indices and bonds. The fund, called RIVIERA, closed last month with USD475 million equivalent among 40 institutional investors in Central and Eastern Europe and the Middle East. The firms expect to close about USD50-100 million more in March and to double its initial size with additional taps throughout the year.

Priya Nair, head of European credit structuring and syndicate at Citi in London, and Nicole Montoya, head of credit constant proportion portfolio insurance at AXA in Paris, said RIVIERA appealed to institutional investors because it tied popular themes in structured credit: principal protection through CPPI; dynamic leverage; and long/short, negative basis and curve trading.

Montoya said it is the first CPPI fund with emerging market exposure. It allows up to 15% emerging markets and 10% high yield. AXA charges a structuring fee of 50 basis points running and a performance fee of 15-20% over-NAV.

Investors can buy the fund directly, through principal protection-wrapped feeder funds for different currencies and tenors or through total-return swaps with Citi. Nair said the most popular form was seven-and-a-half-year principal-protected feeder funds. Notes were issued predominantly in euro's, but also in U.S. dollars and Eastern European currencies.

Montoya said AXA is expanding its presence in Central and Eastern Europe and the Middle East and chose Citigroup for its local presence in those regions and its structuring abilities.

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