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Energy companies unwound weather protection against a cold winter last week after an unexpectedly warm November. Enron and Element Re were seen to be two of the most active players in rehedging December through March exposure.

Fitch plans to hire six or seven collateralized debt obligation professionals for its London-based CDO rating team because of the increase in the number of deals coming to the market. Mitchell Lench, senior director in London, said it has about 15 CDOs in the pipeline this month in comparison to five or six this time last year, approximately one-third of these are synthetic or balance sheet transactions.

Pfaeffikon, Switzerland-based fund manager RMF Capital Markets has boosted its sales team to 12 from three over the last month and plans to hire three more sales professionals in the coming months. The move is part of the fund manager's effort to double its sales of guaranteed funds of hedge funds next year to EUR1 billion (USD884 million), according to Reto Ammann, co-head of capital markets. The expansion is possible because of the growth in demand for uncorrelated investments.

Gartmore Investment Management's recently launched long/short hedge fund, named Avior, may invest in over-the-counter equity derivatives. The fund was launched at the start of the month and as of last week had assets of GBP85 million (USD120 million). An official at the fund manager in London said it currently invests only in cash instruments and contracts for differences, but could use equity options. The investment universe for the fund is the FTSE350 and it invests only in U.K. equities and related synthetics.

Fortis Bank has structured a two-year reverse convertible on shares of Dutch banking giant ABN AMRO, because ABN's shares are trading near their 52-week low and because the high implied volatility on options on ABN facilitates structuring a guaranteed coupon of 11.25%. Koen Zoutenbier, senior account manager on the derivatives and structured products desk in Amsterdam, said the bank began pitching the note to investors last week and is aiming to sell a notional value of EUR15 million (USD13 million) of the product.

Gen Re Securities has named Spencer Kelly, head of structured products in Gen Re's New York office, as head of its newly created structured finance group in London. The new group will offer structured life insurance products, according to Kevin Lecocq, managing director and global head of marketing and structuring in London. The new department was set up as part of the ongoing expansion of the firm's structured products group in London (DW, 1/14).

Hartford Investment Management, a Hartford, Conn.-based money manager with USD171 billion in assets, is in discussions with major investment firms about using credit derivatives for the first time. Bill Meaney, portfolio manager, said it would buy and sell credit-default swaps to hedge its credit portfolio and to take positions. The firm is planning to pull the trigger on its first trade by the second quarter. Meaney said HIMCO recently started examining entering the credit derivatives market after recognizing the dramatic growth in volume.

The generation of large, positive semi-definite covariance matrices that properly reflect market conditions has been a challenge for finance practitioners for several years. Since the 1996 amendment to the 1988 Basel accord, where the principals of internal models for the calculation of market-risk capital were outlined, it has been a major problem to generate the covariance matrices that are necessary to calculate firm-wide Value at Risk estimates. In very large portfolios a risk factor model may be employed, but it is still necessary to have a covariance matrix for all the risk factors of the portfolio.

HSBC plans to expand its interest-rate product range in Taiwan next year to include caps, floors and options as uncertainty grows on the direction of interest-rate moves, according to a senior official in Taipei. "This year the interest-rate trend was obvious, next year it won't be a one-way market," he added. The derivatives will be offered in both Taiwan and U.S. dollars and available within three months.

The Financial Supervisory Service in Korea will permit local securities houses to trade over-the-counter equity derivatives next July; a move that players said will bolster the market. "[The regulations] will strengthen the competitiveness of the securities companies and offer investors a greater range of choices in the financial market," said Lee Young Gi, associate in the securities supervision department of the FSS in Seoul.

Crédit Agricole Indosuez has hired Duan Yang, interest-rate trader at Credit Lyonnais in Hong Kong, in a similar post, according to an official familiar with the move. Yang will report to Eddie Lee, head of fixed income in Hong Kong, when he starts in the coming weeks.

KBC Financial Products is planning to increase its presence in the credit derivatives market by year-end as part of a joint venture between the securities market subsidiary and its parent, Belgium's KBC Bank. The company has recently decided to move its credit derivatives operations from the bank side to the securities subsidiary, in a move that will transform KBC from an end user to an active market maker, according to Carlo Georg, head of international trading in London. The move follows Georg's move from Hong Kong to London to take up the new role (DW, 9/2).