{"id":6114,"date":"2007-05-28T00:00:00","date_gmt":"2007-05-28T00:00:00","guid":{"rendered":""},"modified":"-0001-11-30T00:00:00","modified_gmt":"-0001-11-30T04:00:00","slug":"correlation-trade-is-extreme-sport-for-hedge-funds","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/05\/2007\/correlation-trade-is-extreme-sport-for-hedge-funds.html","title":{"rendered":"Correlation Trade is Extreme Sport for Hedge Funds"},"content":{"rendered":"<p>Reuters- Hedge funds are driving a surge in demand for the riskiest credit derivatives, with winner-takes-all strategies that appear to have turned the art of investing into the financial equivalentof extreme sports.<\/p>\n<p>  As hedge funds jostle for space in London&#8217;s elite Mayfair district, intense competition has created an atmosphere in which only the highest possible returns will suffice, bankers say.<\/p>\n<p>  While coupons on investment grade corporate bonds are routinely about 5 percent, the most radical new derivatives pay up to 60 percent on an upfront basis, in exchange for insurance against  defaults on bespoke portfolios of corporate bonds.<\/p>\n<p>  &#8220;Hedge funds are huge fans of these trades, where they can earn millions of dollars upfront,&#8221; said a structured credit trader in London. &#8220;It&#8217;s extremely high risk, but presumably they don&#8217;t think  any defaults are going to happen soon.&#8221;<\/p>\n<p>  The move into risky investments reflects a wider trend in the credit markets.<\/p>\n<p>  Much of the focus is on so-called equity risk, in which investors offer to insure the first 3 percent of defaults on a portfolio of 100 to 150 companies.<\/p>\n<p>  <a href=\"http:\/\/feeds.feedburner.com\/~a\/reuters\/UKFundsNews?a=gjTrQu\"><img decoding=\"async\" border=\"0\" src=\"http:\/\/feeds.feedburner.com\/~a\/reuters\/UKFundsNews?i=gjTrQu\"><\/a><strong><a href=  \"http:\/\/feeds.feedburner.com\/~r\/reuters\/UKFundsNews\/~3\/119276148\/idUKNOA44280020070524\">Read Complete Article<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Reuters- Hedge funds are driving a surge in demand for the riskiest credit derivatives, with winner-takes-all strategies that appear to have turned the art of investing into the financial equivalentof extreme sports. As hedge funds jostle for space in London&#8217;s [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-6114","post","type-post","status-publish","format-standard","hentry","category-syndicated"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/6114","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=6114"}],"version-history":[{"count":0,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/6114\/revisions"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=6114"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=6114"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=6114"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}