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Hedge Fund Manager Steps Into CDOs

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

Wharton Asset Management is on the verge of entering the collateralized debt obligation business. The London-based firm manages a $1.5 billion hedge fund of asset-backed securities and is among the first European hedge funds to enter the CDO business. "Hedge funds and CDOs are two distinct businesses, but if you can combine those two sides, you can have a more complete view of the market," says Maurice Salem, managing director. The firm is looking at participating in a variety of CDO structures. Salem declined to elaborate further on the plans.

Salem says Wharton will enter the CDO market early next year. Presumably, it would ramp up assets and issue CDO liabilities, as opposed to buying assets from another collateral manager. In a recent interview, Dan Cook, a Wharton fund manager, said the hedge fund doesn't buy structured finance CDOs because it prefers to select its own ABS collateral (BW, 11/7). To read the full text of the interview, go to www.bondweek.com

In the meantime, Wharton is seeking to add high-level securitization specialists to the roster at Wharton. Salem says he does not have a set number of hires in mind, but would like to add top talent when it becomes available. Specifically, he is looking for people with analytical experience who understand deals and how to break them down to look at the underlying credit risk. New hires should also be able to manage diverse ABS portfolios, he says.

Wharton has already made two high-profile hires this year. Most recently was that of Cook, who previously worked at UBS and came on board as head of structured products. The hedge fund also hired Stefano Loretti from Abbey National earlier this year.

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