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Lion Capital Group plans to launch a long/short equity hedge fund that will use over-the-counter derivatives. Markus Jordi-da Costa, managing partner in Zurich, said the fund will use calls, puts and basket options when it launches in February. It will typically use derivatives to short a stock or a basket of stocks. For example, if it thinks the share price of a sector of stocks is going to fall it will buy a put on a basket of stocks in that sector.

JP Morgan will shortly execute what is believed to be the first synthetic securitisation of non-performing loans. The bank will use its Bistro structure, which set the template for all leveraged, synthetic CDOs, to securitise the portfolio of Italian NPLs it bought from Banca Nazionale del Lavoro early in 2000.

Banco de Crédito del Peru (BCP) launched the first Latin American deal of the year on January 10 with a $100m securitisation of SWIFT MT100 payment rights, lead managed by ING Barings. The deal used an MBIA wrap to help overcome political uncertainty. ING placed the deal privately with a very small number of investors, despite the worries caused by the resignation of prime minister Alberto Fujimori.

The Italian treasury is expected to reinvigorate its project to launch a second securitisation of delinquent social security contributions in February. The first securitisation of late payments to state agency INPS was launched in November 1999 for Eu4.65bn. It will face a crucial test on January 31 when its Series 1 tranche, worth Eu1.55bn, reaches its scheduled maturity.

Moody's this week published a performance update on Tussauds Finance Ltd, the £230m securitisation by the Tussauds Group, the UK leisure company which owns the Madame Tussauds waxwork museum in London. The transaction, launched by Bankers Trust in May 1999, offered what many considered the most daring package of risks ever seen in a whole business securitisation.

Spanish savings bank Caixa d'Estalvis de Catalunya this week launched a Eu150m securitisation of loans extended to small and medium sized businesses (PYMEs) to finance investment projects. Jointly lead managed by JP Morgan and Caixa Catalunya, the deal is the fourth in the last year to take advantage of the Kingdom of Spain's offer of a guarantee for part of securitisations backed by PYME loans.

The plan by 15 Spanish savings banks to launch a Eu2.048bn securitisation of cédulas hipotecarias, the Spanish equivalent of mortgage Pfandbriefe, is attracting widespread interest. The transaction, AyT Cédulas Cajas FTA, will be backed by cédulas specially issued by each of the banks. By pooling them and creating a 3.5% reserve fund, the borrowers will be able to issue a bond with triple-A ratings - much higher than their cédulas would achieve on their own.

Volkswagen Leasing GmbH this week launched its fourth securitisation of German car leases in an oversubscribed deal worth Eu750m. Lead managed by Credit Suisse First Boston and Deutsche Bank, Volkswagen Car Lease No 4 Ltd offered two sequentially amortising passthrough tranches, with legal maturities of March and July 2004.

Bank of Scotland (BoS) this week launched its second securitisation of UK residential mortgages, using the innovative master trust structure it unveiled in April 2000. Bookrunner Schroder Salomon Smith Barney once again took advantage of the master trust's power to carve cashflows into investor friendly chunks by launching soft bullet tranches with short legal maturities.

Barclays Bank is believed to have launched a highly unusual yen denominated collateralised bond obligation, backed by a pool of mostly US asset backed securities. The ¥17.25bn ($147m) deal is a fully funded synthetic CBO. Lead manager Barclays Capital declined to comment, but the deal appears to satisfy two objectives. Assuming all the notes are sold to third parties, Barclays will reduce its exposure to the assets to 3% of their face value, and may be able to earn an attractive spread on that equity risk.

Altgate Capital is launching its first five hedge funds and plans to have another five out by the end of the first quarter. The firm opened its doors last year (DW, 10/30). The funds will employ strategies including long/short, merger arbitrage, event-driven, distressed debt and emerging market styles, said James Baker, chairman and a 25-year Goldman Sachs veteran. The funds, will be offered through third-party distribution channels including private banks and financial advisors and will carry standard fees of 1% management/20% performance. Total costs after factoring in those of the distributor will be around 2% management and 25% incentive, Baker said. Private client minimums will be $1 million for investment. The funds will be targeted toward small and medium-sized institutions and high-net-worth individuals. Altgate is presently looking for distribution channels. "We already have five hedge funds lined up for clients....Five will probably not be enough. By the end of the first quarter we will be offering at least 10," Baker said.

A bank in Tokyo bought some USD1 billion in three-month euro calls against the Japanese yen Wednesday, struck at JPY115, according to traders there. Three-month implied volatility on the pair jumped from 15.4%/15.9% Wednesday, to 16.2%/16.7% Friday, a trader said. On Friday the spot stood at JPY112.80, compared with around JPY109 Wednesday, he added. A number of smaller lottery-ticket style positions also traded through the week in U.S. dollar/Japanese yen options, with traders buying deep out-of-the-money dollar calls/yen puts. Traders bought one-year yen puts struck at JPY150, and three-month yen puts struck at JPY125. Such puts are attractive because while they are cheap, if they move into the money they bring potentially massive earnings, one trader said. The dollar traded at about JPY118 Friday.