WEST PALM BEACH, FL (HEDGECO.NET) – Wachovia Securities says it will offer hedge funds an attractive alternative source of long term funding, through a collateralized debt obligation. The new fundingarrangement has been structured through a new venture, Atlas Capital Funding, according to the released statement.
The new vehicle could also offer hedge funds alternative financing via the CDO market. Current CDO process involves unnecessary protocols, according to CDO experts, “Each time you do a CDO, you have to go through a six-month to 12-month negotiation period with the rating agencies. It costs you 1-1.5% in notional investment banking fees plus the rating agencies fees plus the legal fees.”
David Mordecai a senior official at S3 Asset Management said, “Because hedge funds do not have the benefit of a rated capital structure like banks, they are highly dependent on the prime brokerage community.� According to the report, the firm plans to release �triple-A-rated short-term paper and medium-term notes with an initial capacity of $10 billion,� and will provide financing from the proceeds according to the firm.
Yu-Ming Wang, head of Wachovia’s structured credit group said, “The clients we expect are first and foremost, hedge funds because of the flexibility and also because of the broad range of asset class eligible that are attractive to hedge funds.� Larry Penn, managing director and MBS portfolio manager at Ellington Capital Management, said “Those types of vehicles may ultimately replace traditional repos as the financing of choice for hedge funds.�
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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