Avendis Investment Management, a EUR2.4 billion synthetic collateralized debt obligation manager, has launched a novel constant proportion portfolio insurance note.
The USD150 million deal references long and short tranches of European and North American on-the-run credit derivative indices and offers 100% Aaa-rated principal protection. It was issued by Calyon and is called Cortex for correlation trading expertise. It is Avendis' and Calyon's first public managed CPPI of index tranches.
Eric de Sangues, cio at Avendis in Geneva, said the manager chose Calyon for its experience structuring credit CPPI. Cortex began as a reverse inquiry for a client interested in exposure to index tranches in principal protected form. He declined to name or describe the initial client, but said Cortex has also been placed with private banks, pension funds, insurance companies and bank prop desks in Europe and Asia.
Cortex is set up to allow Avendis to take advantage of movements in values from a combination of long and short index tranches. It provides access to credit without taking a directional view. "Correlation is becoming a separate asset class, different from generic credit products," de Sangues said. "It makes sense in the current tight spread, benign credit environment."
Officials said follow-on issuance is expected to bring Cortex to USD300 million.
