CHICAGO (HedgeWorld.com)–By popular demand, Janet Tavakoli is completing an industry survey on the management and best practices related to the offering of collateralized debt obligations.
Ms. Tavakoli–a consultant and expert witness on credit derivatives issues, a published author and speaker on the pitfalls of credit mismanagement and its implications– is well known for her skepticism about some industry practices.
CDOs have grown in popularity among hedge funds in recent years, even after the highly publicized Securities and Exchange Commission case against Beacon Hill Asset Management that charged principals with manipulative pricing of debt securities.
According to a Fitch report released last summer, hedge funds are more likely to invest in illiquid market segments that promise greater returns. Fitch analysts said that hedge funds had become “significant” buyers of subordinated debt and equity tranches of CDOs and certain synthetic structures that can add a layer of complexity to the credit markets.