Profiting from CDOs

Investors that snapped up cash bonds and other simple credit assets at the start of last year have made large profits as the credit market rallied strongly in 2009. While many of the obvious credit opportunities have disappeared, some market participants believe there is still value in more illiquid and structured credit assets. Ben Marquand reports

As banks and institutional investors staggered into 2009 still reeling from the body blows inflicted in the wake of the collapse of Lehman Brothers in September 2008, few were expecting a sharp rally in credit spreads during the year ahead. But brave investors that snapped up credit assets prior to March have made a killing as spreads began to ‘normalise’ during the year.

While credit spreads in 2009 remained volatile due to de-leveraging and investors moving into other asset classes, the