AMP Henderson Global Investors (NZ), an asset manager with over NZD11 billion (USD4.5 billion) under management, is planning to purchase and sell credit-default swaps in the coming months to diversify its NZD4 billion fixed-income portfolio. "We have the ability to do this, we're just waiting for the right opportunity," said Chris Wozniak, cio in Wellington. "This will become another part of our toolbox," he added.
"There's no bias, we'll look to buy protection on existing credits in our portfolio as well as take exposure to diversify," added Wozniak. Default swaps will aid in diversification as most of the portfolio is made up of domestic bonds. He continued that the asset manager will trade Australasian credits, declining to cite specific names or the size it will look to trade. He continued that the asset manager has been eyeing the product for some time (DW, 2/11) but has decided to make the jump now because the market has become more liquid.
The systems and the legal framework have been in place for the last year but Wozniak said it has not pulled the trigger yet as it has not seen a good enough opportunity. He thinks that the continued deterioration in credit quality will bring that opportunity, as it will want to buy protection for its portfolio.
"We deal with most banks in New Zealand," said Wozniak, adding that potential counterparties for credit-default swaps include Westpac Banking Corp. and Deutsche Bank. Credit arrangements and documentation are the most important factors in choosing a counterparty, as price does not vary significantly, according to Wozniak. A credit derivatives marketer at Westpac in Wellington declined comment. Carolyn Bol, spokeswoman at Deutsche Bank in Sydney, did not return calls.