WestAM, the asset management arm of the WestLB Group, will begin to employ credit derivatives in its €2.7 billion fixed-income portfolio, which is run out of its London office. Nigel Jenkins, head of global fixed-income and currency, says the firm will use credit derivatives as a hedging tool as part of its wider strategy to increase its allocation to spread products and reduce its exposure to government bonds. "This is the way the whole fixed-income [investment community] is going to generate excess returns," says Jenkins, noting that governments are issuing fewer bonds and the absolute yield on govvies is relatively modest.
Jenkins would not put a date on when WestAM will begin to use credit derivatives, saying entry into that market is contingent on market circumstances and the firm's clients. Separately, WestAM has hired Moe Daniel, a technical analyst from Barrington, Ill.-based Arbor Research & Trading, to develop analysis of market price actions to enable the firm to improve its market entry and exit timing as well as generate new trade ideas. "We're looking to generate excess returns, but don't want to be exclusively reliant on economic data or short-term value strategies," says Jenkins.