Free content

Margaret Patel, portfolio manager of a high-yield fund with Boston-based Pioneer Investment Management, says her firm is concentrating on four sectors: energy, healthcare, paper and forest products and technology. She adds that her firm is staying away from high-yield telecom bonds, due to the continued credit deterioration in this sector. An internal policy bans investments in the gaming sector.

Los Angeles-based Trust Company of the West has been adding to defensive high-yield sectors such as cable, media, broadcasting and gaming. Melissa Weiler, portfolio manager in the $5 billion high-yield group, says companies in those sectors are asset-rich and have relatively stable cash flow. Further, they receive a lot of equity funding, placing bondholders in a relatively attractive position in the capital structure. For example, TCW purchased PrimeMedia 87Ž8% senior notes of '11 (Ba3/BB-), when they fell from $95-96 to the low 90's after announcing an acquisition earlier this month. When it became clear that the acquisition would be funded through equity, the paper rebounded, and was trading at $96 last week. TCW recently bought new issues by Quebecor (B2/BB-) and the Mediacom 11% notes of '13 (B2/B+). It also picked up some Charter Communications notes of '11 (B2/B+) when those bonds dropped about two points on rumors that the firm would try to compete with Comcast for AT&T's cable business.

Bear Stearns has hired Robert Canning, former managing director responsible for derivatives sales to U.S. based financial institutions at Bankers Trust, as a managing director in the derivatives marketing and sales group in New York. Canning will also take the new position of head of derivatives sales and marketing for U.S. agencies, according to Peter Croncota, global head of fixed income and credit derivatives sales and marketing in New York. The three person U.S. agencies sales team originally reported directly to Croncota but the firm decided to create the new position because the department has recently grown and wants room to grow further as volumes increase.

Deutsche Bank has hired Yves-Francois Brogard, equity finance sales for French-speaking countries at Goldman Sachs in London, in a similar position. The equity finance sales department caters to the cash and equity derivative needs of hedge fund clients.

Schroder Salomon Smith Barney has hired Farid Bassiri, v.p. local currency swaps and options trader at Credit Suisse First Boston in London, as a trader in the credit derivatives group. Officials familiar with the move said Bassiri jumped ship because Salomon's local currency trading desk combines credit derivatives and foreign exchange instruments, enabling him to use a broader spectrum of products than at CSFB, where the two asset classes are traded separately. The location of firms' credit derivatives departments within the overall trading structure is becoming increasingly important in shaping where credit derivatives professionals want to work (DW, 7/16).

Commonwealth Investment Management, a division of Australia's Commonwealth Bank Group with AUD34 billion (USD17 billion) in assets under management, expects to make its first use of credit-linked notes and credit default swaps on Aussie names. Francois Kong, head of fixed interest in Sydney, said the firm is studying using such instruments particularly for its AUD1 billion high-yield fund, to hedge credit risk, as well as to gain synthetic exposure to certain credits. The investment manager plans to throw the internally seeded fund open to external investors and anticipates using credit derivatives as the fund grows.

Credit Lyonnais recently hired Sonia Lee, a credit derivatives trader at the Industrial Bank of Japan in Hong Kong, in the new position of v.p.-Asian credit trader. Lee said when IBJ's credit desk moved back to London she wanted to stay in Hong Kong. The move is understood to be part of a push into credit derivatives initiated with the recent appointment of Omar Abukhadra as global head of credit derivatives in London (DW, 7/9).

Credit Suisse Group has agreed not to hire any Morgan Stanley employees until mid-September, a move widely seen as a condition of the severance package under which John Mack, president and coo, left Morgan before joining Credit Suisse First Boston as chief executive. Human resources managers at CSFB sent a copy of the agreement, which covers employees at every level at Morgan, to recruiters last Monday. Mack did not return calls. Press officers at CSFB and at Morgan Stanley declined comment.

Deutsche Bank has recently received approval from the central bank, Bank Negara, to set up an equity derivatives operation in Malaysia. A Deutsche Bank spokesman in Singapore said the firm has received a license allowing it to enter equity swaps, equity forwards and to sell equity-linked notes in Malaysia. The German bank is restricted to on-shore transactions. An official at Bank Negara in Kuala Lumpur said it does not comment on the activity of individual banks.

A recent flurry of attention on the impact of new accounting regulations, Financial Accounting Standards 133 and International Accounting Standards 39, has highlighted two key questions. First, why should any accounting regulation affect derivatives trading? And second, has there been a significant change in trading?

U.K. fund manager Friends Ivory & Sime, with GBP37 billion (USD52.8 billion) under management, plans to ramp up its use of equity derivatives to enter or unwind positions and is looking to recruit a derivatives manager to handle the additional business. Ian MacFarlane, head of strategy in London, said the manager wants to use derivatives to temporarily change its level of participation in indices. If it decides to extend the maturity of a position it will gradually replace the derivative position with cash, allowing for better execution.