The equity and mezzanine tranches total €2.2 billion, which amounts to €8 billion of overall risk, given the variety of three- to seven-year maturities in the portfolio. The bespoke CDOs were managed by HVB's active credit portfolio management (ACPM) team, headed by Thomas Bretzger. The underlying assets in those CDOs are mainly European investment-grade corporates.
The portfolio references a wide range of structured products on ACPM's books, including combination notes, which pool equity and rated tranches to achieve a combined rating, and structured mezzanine trades. The portfolio is mostly European, but there is a 25%–30% bucket for US names.
Deutsche has broken the portfolio down into isolated risk positions, to better neutralise the portfolio exposure absorbed by the correlation book. Alex Bernand, Deutsche's London-based global head of credit correlation, commented: "To my knowledge, this is the largest synthetic credit trade so far. The fact that the Deutsche correlation book has absorbed such a large risk transfer without moving the market is great news for investors. It answers a lot of questions customers had about liquidity in the synthetic market, and prove you can place complex structured portfolios if you maintain discipline in the pricing of targets."