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Derivatives

Principal Nears Aussie Credit Debut

Principal Global Investors (Australia), part of Principal Global Investors with assets totaling more than USD138 billion worldwide, is looking to trade Australian credit products for the first time.

Principal Global Investors (Australia), part of Principal Global Investors with assets totaling more than USD138 billion worldwide, is looking to trade Australian credit products for the first time. The instruments will be used in its Principal Global Strategic Income Fund, which launched in Australia last May. "Our aim is to grow this fund and move into more interesting things, such as structured products," saidRob da Silva, managing director of Asia-Pacific fixed income in Sydney.

Da Silva said following expected increases in mandates this year, the fund will look at credit derivative strategies such as selling default-swap protection and putting on trades referenced to the iTraxx Australia index. The firm has been eyeing domestic credit derivatives since last year (DW, 11/19), but is waiting for the fund to reach greater size before making the plunge, which Da Silva expects to happen before year-end. Principal is overall targeting a size of AUD300-500 million (USD232.9-388.2 million). The fund currently invests in both domestic and overseas corporate and government debt as well as CMBS and ABS deals. Da Silva noted Principal has been keeping abreast of credit derivative market developments in Australia and already trades credit derivatives for the U.S. and European markets out of other offices.

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