Getting into CDOs

Skillionaire · Post by **Skillionaire** » Wed Apr 04, 2007 9:58 pm

[i][b]Informa also reports that Cheyne is setting up a credit fund targeting equity tranches of CDOs[/b]. According to informa the fund is targeting mid-teens net returns to investors. Cheyne intends to subscribe to 20% of the Fund's shares, up to a maximum of $30mm. It is expected to be structured as follows: Class A Offering semi-annual liquidity, after an initial 1-year lock-up and Class B Offering semi-annual liquidity, after an initial 3-year lock-up, upon 90 days notice. The 3-year lock-up Class contains lower management fees.[/i]

The fund is named "Queen's Walk":

[url=/User%20Files/2550/SCI%20issue%2033%20-%204%20April%202007.pdf]Attached File: SCI issue 33 - 4 April 2007.pdf[/url]

kr · Post by kr » Fri Apr 06, 2007 10:05 am

not sure why you mentioned the informa headline which describes an event at least a year old, rather than the market drop, which is at least a month old

if you want to be current at least mention tetragon instead

Skillionaire · Post by **Skillionaire** » Fri Apr 06, 2007 9:40 pm

I was giving an update to Bachelier's post regarding said fund (earlier in the thread). I thought that the [i]italics[/i] would have designated the quote as such.

sbs · Post by **sbs** » Tue Apr 24, 2007 7:17 pm

Hey Guys,

I am doing a Master's Thesis on CDO Equity Tranches, basically looking at who actually buys this piece given the risk return tradeoff. Basically the thought is that insurance cos and pension depts are circumventing internal risk controls which prevent the buying of junk by getting into the CDO equity pieces. Any thoughts?

Also I am looking for published studies (hopefully unbiased!) of who are the biggest buyers of the equity tranches, and what the reasons have been.

Still in discovery stage, so correct me if i am saying something stupid. Thanks...

Cheng · Post by **Cheng** » Wed Apr 25, 2007 8:48 am

Search for so called "rated equity". These are equity tranches with some kind of capital protection to achive an IG rating.

IMO, hedge funds and prop desks used to be big buyers of equity tranches. Why ? Because of the big cupons you got paid even in a relatively stable credit environment and those people usually don't care about ratings.

baghead · Post by **baghead** » Wed Apr 25, 2007 9:18 am

yes, and check out POs as well. I saw people buying them at 1.5 pts above model because of the limited downside and the massive rolldown over the first few years.

Skillionaire · Post by **Skillionaire** » Fri Jun 29, 2007 4:06 pm

Back to the original topic, it's a great time to be in CDO equity right now.....especially all the hedge funds that thought since they're so much smarter than everyone else they'd have no problem making money in this space - besides the notables that are/have been in the news there are three more large funds that will announce "implosions" on Monday - the good news is that I'm paying $.30 on the dollar for bonds now.....

baghead · Post by **baghead** » Fri Jun 29, 2007 5:11 pm

can you elaborate on the implosions?

AndyM · Post by **AndyM** » Fri Jun 29, 2007 5:37 pm

Getting into CDOs: 100.00

Getting out of CDOs: priceless

baghead · Post by **baghead** » Fri Jun 29, 2007 5:39 pm

LOL,

zero bid, subject to docs....