Citigroup Asset Management Australia, with more than AUD6.5 billion (USD3.64 billion) under management, is gearing up to trade credit derivatives for its AUD4 billion fixed-income portfolio. "It's something we're considering," said Anthony Kirkham, senior portfolio manager in Melbourne, noting the firm would look at buying as well as selling credit-default swaps.
"Credit derivatives can obviously be used as a hedging tool as well as allowing you to diversify your portfolio--you can gain exposure to names you can't access in the physical market," explained Kirkham. However, he said the asset manager will first have to get approval from clients to alter individual investment mandates, which it will look to get in the coming months. "It might be as long as one year [before we pull the trigger]," added Kirkham. He continued the asset manager was speaking with investment houses about credit derivatives as well as market developments. "We don't want to be left behind," he said, adding, "We're quite open to looking at these products."
Kirkham said the asset manager deals with a number of houses outside of its parent firms Citibank and Salomon Smith Barney. Citigroup Asset Management looks at factors such as quality of research, credit rating and pricing, when selecting counterparties. Deutsche Asset Management Australia is also studying using credit derivatives in Australia (DW, 6/30).
