Tailor-made CDOs for all

Like a tailored suit, synthetic CDOs are highly customised products made to fit the individual requirements of investors. But banks are now trying to commoditise these products and make them available to more investors. Jill Wong looks at some issues in commoditising synthetic CDOs

Customisation has always been a feature of synthetic collateralised debt obligations (CDOs). Bespoke transactions – where the bank or provider custom-makes features, such as portfolio composition, maturity, credit rating, size, subordination and currency denomination of the notes to suit one investor or a small group of investors – have been highly popular over the past few years.

Even traditional synthetic CDOs – those with various tranches sold across the capital structure – were generally