According to one CDO equity investor, each time a cashflow CDO pitch book arrives in his inbox he deletes it. Not that he is opposed to the asset class. However, static pool synthetic investment grade CDOs, with no manager fees, can pay nearly a 40% yield, if using a zero default base case.

"Without giving away my secrets, one can structure five, five-year bullet, synthetic CDO equity investments so that if four out of five deals have their cashflow shut off, you would still break even on total principal investment," the investment manager said. "However, I still wouldn't touch the mezzanine class in an investment-grade CDO in this environment."

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