Funds driven to derivatives

In their increasingly arduous search for yield, fund managers are dabbling in the derivatives market. John Caserta asks whether these typically conservative and risk-averse investors are ready for such a step. Additional reporting by Alan McNee

Weak returns have prompted an increasing number of investors to turn their attention to credit derivatives in search of yields that have eluded them elsewhere. But while European investors are embracing credit derivatives, US investors are a bit more wary of the market.

Industry experts often note that different investment strategies and regulatory environments account for the discrepancy in the use of credit derivatives, especially between investors in Europe and the US. While such derivative