Income Partners Asset Management (HK), a fixed-income fund with USD550 million under management in Hong Kong, is considering issuing its first synthetic collateralized debt obligation in the coming months. The CDO will be structured entirely on Asian credit-default swaps. "We've got the technology to do this in-house," said Francis Tjia, executive director. Income Partners currently has four cash collateralized bond obligations in its investment portfolio, totaling USD400 million, of which two were structured in-house.
The fund is considering issuing a synthetic CDO, likely USD100-300 million, which the fund would manage, said Tjia. The manager will keep a portion of the equity tranche. Additionally, Income Partners will use an investment bank to distribute the remaining tranches to investors which will be sold in the form of credit-linked notes. It has yet to approach banks for a deal but will chose firms based on distribution and structuring, noted Tjia. He added that as the credit derivatives market in Asia is becoming more liquid, the fund is now able to structure such products.
Income Partners, which is domiciled in the Cayman Islands, also invests in credit-default swaps and credit-linked notes on Asian names. Tjia continued that the credit derivatives products make up 10-15% of the portfolio. "We deal with most houses," added Tjia, singling out Credit Suisse First Boston. Josephine Lee, spokeswoman at CSFB in Hong Kong, did not return calls.
"There's liquidity issues in Asia from time to time," noted a structurer at ING Barings, adding that Income Partners may have difficulties in executing a synthetic CDO in Asia due to the variation in liquidity on Asian credit-default swaps. "It's our area of specialization," rebuked Tjia, noting that Income Partners' focus is on Asian credits.
