LG Insurance, one of Korea's largest insurers by assets, is looking to invest in synthetic collateralized debt obligations for the first time in the coming months. "As the Korean bond market's yields are too low we need to find products with yield pickup," said Sang Heon Kim, manager of the fixed income department in Seoul. "We're currently reviewing CDOs," said Kim. The insurer has a KRW2.5 trillion (USD2.09 billion) fixed income portfolio.
The insurer is in talks with several houses about the products including Deutsche Bank, JPMorgan, Morgan Stanley and UBS. Kim said the firm recently made major investments in housing loans and is looking at structured credit products to diversify its book. The firm is looking at putting USD10-50 million into CDOs within six months.
In addition to CDOs, LG is also considering purchasing capital guaranteed notes referenced to hedge funds. "We're interested in hedge fund related products," said Kim, noting that such notes would allow the firm to diversify its portfolio while gaining a higher yield. LG selects counterparties on the basis of pricing and market reputation.
Prakash Krishnan, spokesman at Deutsche Bank, and Joanne Shephard, spokeswoman at JPMorgan, declined comment. Pauling Cheung, spokeswoman at Morgan Stanley and Mark Panday, spokesman at UBS, did not return calls.
