Despite structural improvements made to collateralized debt obligations, collateralized debt obligation investors are still calling for more transparency and deal information. Sean Kirk, of United Capital Markets, links the lack of deal information to the lack of liquidity in the secondary CDO market. "It's a market in a subtle sense of decline. There is no information flow into the secondary market. A triple-A piece will be priced at LIBOR plus 50 and immediately trade at 150 over in the secondary market," he says.
Viktor Schneider of Bankgesellschaft Berlin, likens purchasing a CDO to buying a Porsche. "Once you turn the key, you automatically lose ten thousand dollars," he said to illustrate the dramatic difference between primary and secondary market pricing.
Bankers did not address investors' concerns, but instead concentrated on describing changes made to CDO structures and manager fees to benefit investors. Sridhar Bearelly of Lehman Brothers' CDO group, points out that managers are addressing the diverging interest of triple-A and equity investors. Gareth Levington of Moody's Investors Service, notes that managers are keeping more cash in the deals as well as making good will changes such as subordinating management fees.