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Robeco Alternative Investments may use over-the-counter derivatives to structure a guaranteed fund of hedge funds it plans to launch in the spring. Edwin Noomen, v.p. in Rotterdam, said the fund is likely to be around EUR50 million (USD42.9 million), have a five year maturity and will be referenced to a portfolio of 15 funds across six categories, including convertible arbitrage and global macro.

Wall Street equity derivatives desks were abuzz last week with reports that Credit Suisse First Boston had bucked this year's trend and paid an eight-figure bonus to one of its star performers. Michael Crooks, managing director in equity derivatives group and head of the group's private client and retail team, reportedly received a bonus of at least $10 million, said rivals. Crooks did not return calls. Victoria Harmon, a CSFB spokeswoman in New York, denied the rumors. "That is absolutely not true."

Hedge funds shopping for credit protection last week pushed default swap spreads on European names, such as France Telecom and Fiat, about 80 basis points wider apiece. The two names underperformed sector peers, such as British Telecom and DaimlerChysler, which each widened by only 20 bps.

Algometrics, a London-based hedge fund, is seeking to raise up to USD500 million for a flagship equity fund that will trade over-the-counter equity derivatives. The global statistical arbitrage fund will invest in cash equities as well as exchange and OTC-traded equity derivatives, said Stephen Smith, managing director. The fund, which currently has USD30 million in private capital, will also act as an options market maker. Smith believes this will give investors a unique opportunity to take on exposure to market-making profits. The only other way they could achieve this is through buying shares in securities houses, which typically entails taking on exposure to other businesses.

Eight months after announcing its arrival in the nascent credit derivatives market with a pair of high profile hires from Bank of America, HSBC is looking to add at least 10 credit derivatives traders, marketers and structurers in New York, according to a company official. "This is something that has been in the works for more than six months. The ground work has been set and now we're ready to hire," the official said.

The New Zealand Debt Management Office, which runs a NZD37.2 billion (USD14 billion) debt portfolio on behalf of the government, is looking to increase its use of cross-currency interest-rate swaps this year on the back of expanding its euro medium term note program, according to Phillip Anderson, treasurer in Wellington. "We'll borrow somewhere in the range of NZD500 million to NZD1 billion this year," said Anderson. Of the NZD37.2 billion debt portfolio, NZD7.9 billion is denominated in foreign currencies.

Equity derivative marketers in Japan believe in the coming weeks there will be a surge in demand for structured notes embedded with barrier options linked to the performance of the Nikkei 225. The value of transactions could swell to JPY20-30 billion (USD149-224 million) as Japanese retail clients rush to pick up yield before the fiscal year closes at the end of March. "This will likely accelerate in the next couple of weeks," said an equity derivatives marketer in Tokyo. There is currently about JPY37.5 billion of Nikkei-linked notes in the market, of which many were structured in October after the Nikkei bounced back from September lows around the 9,600 level. The index climbed to 11,000 by November.

The failure of Kmart Corp. has spurred Cardinal Health, the largest U.S. supplier of health care products to the retail industry--supplying pharmaceuticals to about 1,600 Kmart stores--to step up its interest in using credit derivatives for the first time. "These guys have looked at buying protection before, but the Kmart blowup has forced them to double their focus," according to a market official familiar with the company's plans. Richard Miller, cfo in Dublin, Ohio, did not return calls by press time. Lisa Kim, a company spokeswoman, was unable to provide a comment by press time.

Raymond Wong, managing director of global equity markets at Merrill Lynch in Hong Kong, relocated to Tokyo two weeks ago in a similar position handling equity derivatives trading and structuring for the Japanese market. Wong confirmed the move, declining further comment. He is thought to be replacing Ajay Soni, who has taken a new role in London (see story, page 1). James Rodríguez de Castro, managing director of global equity markets in Hong Kong, will assume Wong's responsibilities in addition to his own. De Castro declined comment.

Eddie Tam, director of equity derivatives sales at Credit Lyonnais in Hong Kong, resigned last Tuesday for what he attributed to personal reasons. "I'm looking for a new challenge." Tam, a seven-year veteran of Lyonnais who previously worked at Merrill Lynch in New York and Hong Kong, said he plans to take time off from the industry and do some traveling.

Merrill Lynch is forming a proprietary equity-linked trading group that will be spun off from its convertible bond group. The new effort, named the Strategic Risk Allocation Group, will take positions in over-the-counter equity derivatives and equity-linked notes, according to Olivier Deloire, head of European equity-linked trading in London. The move is regarded as a major departure for Merrill, since the firm has historically been risk averse, said rivals.

Merrill Lynch has started producing a dedicated credit derivatives research product to meet increasing end-user demand for synthetic credit exposure. Chris Francis, head of European and Asian credit research--who is now responsible for credit derivatives research--said the move marks the first time Merrill is regularly pitching default swaps as an investable asset class to clients. "Before we used to do it occasionally when we did a big piece on credit strategy, but a lot more clients are getting involved in the market and a lot more are looking to get involved."