Bond giant PIMCO has created an internal risk management committee to determine when and whether the firm should issue collateralized debt obligation liabilities, and to oversee the bond manager's CDO business as a whole, according to a Standard & Poor's report on the firm. The Newport Beach, Calif., bond manager set up the five-person team recently to consolidate its burgeoning CDO management business, which to date has seen it issue more than a dozen CDOs backed by various asset classes.
An outside manager notes the moves makes sense because firms generally make CDO decisions on a sector-specific basis depending on arbitrage opportunities, i.e., whether investment-grade corporate bonds are cheap enough to structure a CDO. And since the CDO market has grown unevenly--high-yield and emerging market CDOs were part of the market's first wave and the market more recently has moved more toward leveraged loan and structured finance CDOs--one analyst notes many large managers have viewed CDOs as an ancillary business. But by creating a firm-wide committee, PIMCO can better evaluate CDO opportunities on a broader basis, the outside manager reasons.
Calls to CDO officials at PIMCO were referred to Mark Porterfield, a spokesman. He and Michael Wasserman, an analyst in S&P's CDO manager evaluations group and the author of the report, did not return calls by press time.