A taste for complexity

When constant proportion debt obligations first hit the market late last year, many market participants complained that they were too complex, even for sophisticated institutional clients. Now, however, growing numbers of bankers are predicting that the investments could find favour among retail investors

So far, the investor base for constant proportion debt obligations (CPDO) has remained synonymous with the institutional investor community. But the huge groundswell in publicity for CPDOs is also leading to greater awareness among pockets of the retail community, such as private banking clients and high-net-worth individuals.

A CPDO is a highly levered and dynamically leveraged exposure to a portfolio of credit default swaps, which is adjusted to target payment of the coupon and repayment of the