Search results for

Daehan Fire & Marine Insurance, with over USD700 million in assets, is gearing up to purchase credit derivatives for the first time. "We're looking at credit-related instruments for the new fiscal year," said Sei Young Park, manager of the investment department in Seoul. Daehan plans to purchase credit-linked notes or tranches of synthetic collateralized debt obligations for its USD400 million fixed income portfolio. The insurer will start out small, likely USD5-10 million. Daehan traditionally reassesses its asset allocation at the onset of the new financial year, April 1, explained Park.

The Bank of Korea, South Korea's central bank with USD120 billion in foreign reserves, is eyeing purchasing derivatives for the first time, according to DW's sister publication Global Money Management. An official at the bank said it is exploring using interest rate and currency swaps for its USD12 billion bond portfolio, which is primarily invested in AAA government bonds. "We're studying swaps for hedging as well as duration targeting," said the official. "As foreign reserves in Asian central banks have been growing...we need to target greater returns," he added. He explained that as the reserves continue to grow in Korea from USD96 billion in 2000 to USD120 billion, the central bank is looking at derivatives. The official declined comment on a specific timeframe for its plans.

Schroder Salomon Smith Barney has grabbed the top spot in Derivatives Week's first-ever ranking of structured medium-term note issuance, but the U.S. bulge bracket firm has had a slow start so far in 2003.

Mike Pavelec, co-head of interest rate sales at Merrill Lynch in New York, which includes interest-rate derivatives sales, is moving to Atlanta, Ga. for personal reasons and is relinquishing his co-head role as part of the move. Pavelec said he will continue to work for Merrill in Atlanta as a senior salesman.

SEB Hypothekenbank, a German mortgage bank, entered an interest rate swap to convert a recent EUR125 million (USD134.12 million) offering into a floating-rate liability. Drew Patrick, treasurer in Frankfurt, said the bank typically issues fixed-rate debt to match fixed-rate loans and does not convert the debt into floating. Its recent EUR125 million bond issue, however, was opportunistic funding without a matched asset and the firm wants to remain market neutral by funding at a LIBOR-based rate.

"There has been a shift from principal protection to value protection."--Mike Tims, ceo of MTN-i in London, explaining the increased popularity of inflation-linked MTNs. For complete story, click here.

Lehman Brothers has nabbed Muse Kwong, v.p. and structurer at Merrill Lynch in Hong Kong, for a similar role on its Hong Kong desk. Kwong will handle interest rate and foreign exchange structuring and report to Kirk Sweeney, head of Asia ex-Japan fixed income sales at Lehman in Hong Kong. Sweeney did not return calls. Kwong, who is said to start in the coming weeks, could not be reached for comment.

The Federal Reserve Bank of Texas has come out with a robust challenge to Warren Buffett's recent claim that derivatives are weapons of mass destruction, deeming them instead "instruments of financial reconstruction." Thomas Siems, senior economist and policy advisor in Dallas, who co-authored the study into banks use of derivatives, argues free market policies instituted in the 1990s have promoted innovation and effective risk management systems among banks and derivatives have played a vital role within these systems. "Rather than being financial weapons of mass destruction, derivatives instead may be viewed as instruments of financial reconstruction," Siems quipped, rephrasing Buffett's statement in Berkshire Hathaway's annual report last month.

Susquehanna International Group has hired Paul Brownstein, a director in equity derivatives sales at Deutsche Bank in San Francisco, for a similar position. Don Hart, associate director and co-head of equity sales in Bala Cynwyd, Pa., said the hire reflects an effort to build its equity derivatives sales activity.

New York-based hedge fund manager L-R Managers will likely purchase puts and calls in its soon-to-be-launched L-R Global Fund, a global value equity hedge fund. The fund, which is expected to launch with approximately USD70-75 million in assets, will operate as an analogue to the firm's L-R Global Partners fund. The latter has over USD115 million in assets, and will continue to be managed separately, explained J. Murray Logan, managing partner. As with the firm's existing fund, L-R Global Fund will primarily use equity derivatives, such as the purchase of out-of-the-money puts and calls with short expiry dates, as protection against any anticipated dramatic market falls. The instruments will also be considered as investments, he added.

Five-year credit protection on Philip Morris U.S.A. exploded to trade as wide as 350 basis points last Wednesday, in from 180bps seven days previously. Movement on the name was motivated by credit concerns after its parent, Altria Group, was ordered by an Illinois court to post a bond of USD12 billion in order to appeal against a decision that holds the firm liable for misrepresenting the danger of its 'light' cigarettes.