According to Standard & Poor's, approximately 50% of the synthetic investment grade (IG) CBOs in their hearty queue are backed by static pools, with managed IG synthetic deals making up the other half. "We're seeing a resurgence in the static pool IG CBO," notes Nik Khakee, S&P's synthetic CBO director. Helping this comeback are disclosed pools and bankers allowing investors to take a proactive role in adding and removing credits. For example, two months ago, a bank sponsored static pool IG CBO had WorldCom, Inc. in the portfolio initially shown to investors, which was later replaced without much opposition from the bankers.
With greater transparency since the first generation of static pool IG CBOs, investors see a lot of value in not paying a manager, thus saving on management and banking fees that are squeezed out of the notional amount of the deal, which some say weakens the transaction right out of the gate.