New York-based MBIA Asset Management, a subsidiary of MBIA Inc. with over USD40 billion in assets, plans to begin investing in synthetic collateralized debt obligations for the first time, according to a market official familiar with the firm's plans. MBIA Asset Management, which has been investing in cash CDOs for several years, is considering pulling the trigger on its first investment in a synthetic CDO by the fourth quarter, the official said. "They've been taking a close look at the synthetic market for quite some time. The banks are constantly marketing their new products to them. It's only a matter of time before they make the move," another market official noted. Cliff Corso, president of MBIA Asset Management, did not return calls by press time.
Market officials added that it's likely that MBIA would look to invest up to USD100 million in the high-rated tranches of a synthetic CDO for its first foray into the burgeoning market. "It's going to look at investing in the single A or higher rated tranches," one official added. The asset manager is interested in the synthetic products because they are diversified and can offer an enhanced yield, he added.