LAGUNA NIGUEL, CALIF. - Credit opportunity funds - defined as a fund that allows the manager to rejigger his or her asset mix - are employing that flexibility to swoop in and purchase discarded CDO bonds, said Dale Leshaw, head of credit at Alcentra, during a panel discussion at Opal Financial Group's CDO Summit held here last week.

When Delphi Corp. bonds were trading down following news of an impending bankruptcy, for example, the funds were in a good position to buy those securities from CDOs, which had to shed them as spreads widened and ratings fell, he said. Following the bankruptcy announcement, of course, the bonds became significantly more expensive. "We can buy those because we're not emotionally attached to ratings," Leshaw said.

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