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Mellon Eyes CDS For Fixed Income Hedge Fund

29 Jul 2004

Mellon Global Investors, the London-based distributor of Mellon Financial Corp., will launch an absolute return bond and currency fund next month and is considering using credit derivatives alongside currency forwards and options on government bond futures.

Mellon Global Investors, the London-based distributor of Mellon Financial Corp., will launch an absolute return bond and currency fund next month and is considering using credit derivatives alongside currency forwards and options on government bond futures. The fund will be managed by Newton Investment Management, Mellon's U.K. asset management subsidiary, which has around GBP21 million (USD39 million) under management.

Paul Brain, a director in the fixed income team at Newton in London, explained the fund will discuss using credit derivatives with its prime broker in the coming weeks, but confirmed it will use forwards and options on bond futures. The fund has been developed for offshore and institutional investors looking to boost portfolios affected by tightening spreads and rising interest rates, noted Brain. "There is a clear demand for absolute return products," he added. Newton expects to raise USD100 million within the first two months of the fund's launch, but Brain said funds under management could grow beyond this.

 

29 Jul 2004