Credit's quiet revolution - Part one of roundtable | Participants Peter Lee, Euromoney Following the discussion so far, what are the new products and developments that investors should be looking at now? Diversification of underlying must be crucial in avoiding problems.
DP, Henderson Finding new collateral is what diversifies the client at the end of the day, not repackaging the same old credits over and over. Right now there are only 500 names in the CDS universe and eventually you'll get a credit event in some CDO or other and then you'll find it happening identically wherever else that name occurs.
Up till now, though, investors haven't focused enough on diversification of their portfolios. We continually get investors wanting us to do repeat transactions for them, but using the same portfolio we are already managing on their behalf. So while it's in my interest to crunch out as many trades as possible, I recognize that this is not in my clients' interests as I do not diversify their risk. I must therefore look at launching different deals whose underlying portfolios have different characteristics that genuinely spread clients' risks. And the investors must look through to the underlying.
