Replicating hedge funds

Dealers are hatching a new batch of trading-strategy index products in Asia targeted at the same investors that traditionally invest in constant maturity swap steepener and range accrual structured products. They call them the new generation of alpha products. What are they? And will these instruments put dealers on a collision course with their hedge fund clients? Christopher Jeffery reports

The interest rate yield curves in Asia's major economies have flattened in the past two years - indeed, some have inverted at the front end. This means many of the traditional fixed-income structured products, such as range accruals and constant maturity swap (CMS) steepeners, are out of favour. Such trading strategies are known as 'directional plays', and current market conditions - where central bankers are typically tightening monetary policy, notably in popular markets such as South Korea -