The Hospitals of Ontario Pension Plan, which manages roughly $14.7 billion, is considering purchasing true sale and synthetic collateralized debt obligations of CDOs for the first time. David Long, portfolio manager for derivatives in Toronto, said as it becomes harder to find investments that produce yield, the plan is looking to new structures, such as CDOs of CDOs, which can offer attractive spreads. The plan already invests in cash and synthetic CDOs.
The pension fund is evaluating both senior and equity tranches of CDOs of CDOs, said Long. It will plow ahead with purchasing the product if it views the structures to offer both absolute value according to its risk/reward profile and relative value when compared with other credit spread products, he says.