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Derivatives

Deutsche Bank Markets Novel CMCDS Overlay Deal

Deutsche Bank is marketing a capital-protected CDO equity product with an overlay of constant-maturity credit-default swaps.

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Deutsche Bank is marketing a capital-protected CDO equity product with an overlay of constant-maturity credit-default swaps. The deal, named Topaz, allows investors to express a view on default rates through the equity tranche, but also offers exposure to credit spread widening through the CMCDS overlay.

Capital-protected equity tranche deals using constant proportion portfolio insurance have been buzz products this year (DW, 2/18), but the CMCDS twist added by Deutsche Bank is new to investors. Credit derivative pundits also say capital-protected credit funds, such as the fund AXA Investment Managers and ABN AMRO launched this year (DW, 1/28) could bring credit to the masses. Mark Stainton, co-head of the CDO business at Deutsche Bank in London, said the deal has been marketed very broadly to a wide range of investors. "It's been very well received," he added. It has been offered to investors in both Europe and Asia.

SG Asset Management is the manager of the 10-year deal, which will close next month. Topaz is rated AA minus on principal by Standard & Poor's.

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