SOUTH BEACH, Fla. - Market players at the Strategic Research Institutes's ABS Industry Summit last week noted that trends in the investment-grade sector of the CDO market are toward higher-quality credits in the collateral pool, restrictions on asset manager activity and increased protection of the mezzanine classes - even at the expense of equity investor returns. In fact, changes in rating agency methodology for future transactions will be designed to prevent perceived abuses on the part of asset managers.

"In the same way that the high-yield sector has moved into loans as collateral, the investment-grade [CDO] market is starting to move into higher-quality names and solid credits, noted Joe Schlim, a partner at Aladdin Asset Management. "We will no longer seek 40% yields on collateral investments."

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