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Derivatives

Asset Manager To Use Credit Products

UOB Asset Management, the fund management division of Singapore's United Overseas Bank, expects to start buying and selling credit derivative products within three months. "We're just waiting on the paperwork," said Shee Keen Yip, fund manager in the fixed-income department. Yip continued that once the legal paperwork is out of the way the fund will look to both invest and buy protection on its underlying bond positions through credit-default swaps and credit-linked notes. Yip continued that the fund will first start using credit-default swaps in smaller increments, between USD5-10 million, declining to elaborate on an estimated total notional exposure. It has a fixed-income portfolio of SGD1.2 billion (USD669 million).

"It's a natural requirement," said Yip, adding that credit derivatives offer an efficient way to hedge and obtain exposure on credits. The products will predominately be referenced to Asian names.

The fund manager has not been able to look at these products before because the legal team is tied up with UOBAM's merger with Overseas Union Bank. "That's their priority right now," said Yip. He expects outstanding issues to be resolved in the coming weeks. Yip continued that UOBAM is currently talking with potential counterparties about available products and the terms of structures. He declined to name the firms. He added that counterparties will be selected on the basis of pricing as well as on the terms offered on any trade.

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