Crossover expansion was a mistake, say investors

摘要

A row has erupted between European dealers and fund managers over the performance of the iTraxx Crossover credit default swap index, which some investors say has failed to function effectively since it was expanded late last year. The index, which moved to 75 from 60 high-yield names in October, has been priced since the change at generally wider bid/offer spreads and exhibited increased levels of volatility. One reason, the funds claim, is that many of the new names do not trade. "Expanding the index was a mistake," said Laurent Beruti, a portfolio manager at Paris-based Hellebore Capital Management. "There is almost zero activity on quite a few CDS, and the result is extremely wide bid offers and a reduction in index arbitrage opportunities which has led to gaps in index pricing."