As BNP Paribas closes the book on an eventful 2006, its credit derivatives structuring team continues to expand. These new additions mean more opportunities for the firm and further growth in store for 2007.
Herve Besnard, who leads the 20-member London-based team, welcomed Ronald Nittenberg as the latest addition to the credit derivatives group. Nittenberg joins the team from JPMorgan and will focus on regulatory and accounting trade, an area that has seen expansion driven by the regulatory shift from Basel I to Basel II. "We want to make sure our clients are getting an efficient regulatory capital deal within the new opportunities available in this shifting environment," Besnard said.
Among some of the innovative deals the team worked on in 2006, Besnard highlighted the bank's largest long-short Constant Proportion Portfolio Insurance (CPPI) transaction called Axiom, which has issued nearly 1 billion ($1.29 billion) to date. Axiom marked the first time a true long-short strategy has been utilized within the credit CPPI space. The BNP team also sold its first Constant Proportion Debt Obligation (CPDO) dubbed Recipes, which contains the same dynamic leverage technology that the bank used for its CPPI (ASR, 11/6/2006). The team has also closed its first CDO of ABS that benefited from increased liquidity in the ABS sector.
On the regulatory side, Besnard is more cautious to reveal the structures that the team has worked on and is looking to execute this year. He said, however, that the group had worked on a number of deals throughout 2006. "The regulatory side is certainly more confidential, so we don't broadcast our new schemes but we want to make sure that we are always ready to come up with new plans that best accommodate our needs," he said.
As for further growth opportunities within the team, Besnard said he believes that having a group of 20 people is the right size, although he added that with more market opportunities ahead, it's likely that the staff would grow further throughout the year.
Besnard has headed the credit derivatives structuring team since 2004. Throughout his three-year tenure, he said that the evolution of the market has been rapid, keeping his team very busy. "Over the years, some of the more defining highlights in the evolution of this market have been on the managed side," he said. "We've been able to develop a managed platform and it's been one of our key elements of growth. On the products side, we have strived to structure more managed alpha product and offer them to investors." Alpha investments refer to excess return attributable to a manager, and beta refers to the return of an underlying benchmark.
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