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Derivatives

Seneca Mulls Synthetic CDO Launch

Seneca Capital Management, a San Francisco manager best known for its bond capabilities, is considering launching a synthetic collateralized debt obligation this year.

Seneca Capital Management, a San Francisco manager best known for its bond capabilities, is considering launching a synthetic collateralized debt obligation this year. The USD12 billion firm launched its first cash mortgage- and asset-backed CDO in December, a USD1 billion structured dubbed Broderick CDO 1, and is targeting financial institutions worldwide. Albert Gutierrez, cio for fixed-income, said he has been pursuing product diversification since he joined the firm in April 2002.

A synthetic deal or two in corporate credit and in asset-backed securities are under consideration. Whether the firm goes ahead will depend on opportunities in the market and client demand. In the past, Seneca has selected counterparties for their ability to execute the deal and facilitate a good transaction, and also their distribution networks and ability to perpetuate the business Seneca is developing. The manager also considered how much capital the banks were willing to put up and the firms' familiarity with Seneca.

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