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U.K. asset management company Gartmore plans to launch a long/short hedge fund Thursday that will invest in European small cap stocks and may use over-the-counter derivatives. The AlphaGen Cetheus fund is being launched to take advantage of investor appetite for alternative investments, according to Martin Phipps, head of hedge funds in London. The fund will start with USD50 million of capital.

Korea Asset Management Co., a government agency with USD40 billion in assets, expects to increase its use of currency swaps on the back of a planned expansion of its overseas asset-backed securities issuance this year. Issuing ABS overseas is part of a longer-term plan to tap a wider investor base and ensure liquidity for these investors, said C.H. Kim, executive director, securitization department in Seoul. Although it issued overseas last year, it focused more on the domestic market, he added.

J.P. Morgan has ironed out nearly all the creases in its global credit derivatives trading group following its merger with Chase Manhattan. According to an organization chart obtained by DW, the group is run and staffed almost entirely with officials from the J.P. Morgan side. This is not surprising, according to several market professionals, because the credit derivatives trading desk at Chase was relatively small prior to the merger. Heading up global emerging markets credit derivatives is Guillaume Nicolle, v.p., while Jean-Pierre Lardy, v.p., heads North American flow business in credit derivatives. Both came from J.P. Morgan prior to the merger.

Lehman Brothers and Goldman Sachs are both recommending clients purchase volatility on swaptions to enter into five year swaps in five years. Continued demand for short-dated hedges by mortgage investors and servicers is bidding up short- to medium-dated swaption vol relative to the back end. Similar trades have made sense for at least a month (DW, 1/28), but the value is now in buying options to enter five-year swaps, said George Oomman, chief interest-rate derivatives strategist at Lehman in New York.

Kookmin Bank and government-owned Korea Development Bank are gearing up to become the first domestic Korean banks to structure and market credit derivatives. KDB, with USD65 billion in assets, wants to do this now to benefit from an anticipated increase in demand for credit products, according to H.J. Cho, manager, trading department, financial engineering team in Seoul. The firm has added incentive since margins in interest-rate and currency derivatives are being squeezed as more banks start quoting prices on these instruments, he noted. KDB has a USD25 billion (notional) derivatives book. Kookmin, with KRW97 trillion (USD77.6 billion) in assets, wants to enter because low domestic interest rates are leading yield-hungry investors to consider credit derivatives for the first time, said Nick O'Kane, manager, derivatives and structured products in Seoul (DW, 2/4).

Macquarie Bank is planning to hire two equity derivatives traders in Tokyo and will also hire structuring and marketing professionals. Ottmar Weiss, executive director, head of equity markets in Sydney, said the new positions reflect Macquarie's commitment to gradually expanding its presence in Asia. He declined to specify how many marketing and structuring professionals it will hire or the current size of its Tokyo team. In Japan, Macquarie operates through a partnership with domestic giant Mizuho Securities.

Sydkraft, Sweden's largest power company, has entered a cross-currency basis swap to convert proceeds from a EUR300 million ($273 million) bond offering it made earlier this month into Swedish krona. Through the swap Sydkraft converted its debt liability from 60 basis points over Euribor into a synthetic floater at 68 basis points over Swedish krona LIBOR, says Gunnar Milssomstig, deputy group treasurer. The identity of the swap counterparty could not be determined by press time.

Thai Farmers Asset Management, with THB140 billion (USD3.3 billion) in assets, plans to start using over-the-counter derivatives this year on a THB120 billion portfolio of fixed-income assets to take advantage of potential hikes in interest rates. Yingyong Nilasena, first senior v.p., fixed income in Bangkok, said a rise in interest rates would erode the value of its fixed-rate bond portfolio. He added it likely will enter a fixed-to-floating rate swap in its first transaction.

Traders entered one- to three-month U.S. dollar/Aussie dollar straddles last week, hedging against a depreciation in the Aussie dollar, said a trader in Melbourne. Typical trades entailed buying 30 delta out-of-the-money Aussie dollar puts and selling 20 delta out-of-the-money Aussie dollar calls, he said. One-month implied vol jumped Tuesday night from 13.1% to 13.8% after the Australian dollar weakened from USD0.5310 to USD0.5215 in the same period, having hovered at around USD0.53 for much of the previous week. The Aussie dollar depreciated as the euro weakened against the U.S. dollar, he added, noting that it has been tracking the common currency for well over six months. One-month risk reversals favored Aussie puts.

Westdeutsche Landesbank is setting up a commodity-trading group that plans to trade derivatives on computer memory storage capacity, in what rival bankers said is likely a first for the over-the-counter market. According to DW sister publication Power Finance & Risk, the effort is part of a new group at the German bank that will trade other non-traditional commodities, including weather derivatives and emission credits. Marc Wall, managing director at WestLB and head of the new group, declined to comment.

The Deal Roll-off Chart, provided by Capital DATA Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.