AMP Henderson to use credit default swaps in Australia

Investment management firm AMP Henderson Global Investors is preparing to use credit default swaps in Australia for the first time, to obtain credit exposure to Australian companies outside the domestic corporate bond market.

“We invest in credit default swaps at our London office, and investment from the Sydney office is imminent,” said Mark Beardow, credit manager at AMP Henderson, based in Sydney, adding that the company could utilise credit derivatives as early as next month.

Strong demand for corporate bonds in Australia has led to a shortage of paper in the domestic market, prompting some investment managers to consider other avenues, such as default swaps, to get credit exposure. "The advantage of credit default swaps is you can access names which you can't access in the cash market," Beardow said.

In the past, many asset managers in Australia have been constrained by investment mandates that prohibit investment in derivatives instruments, but this is slowly changing, says Beardow. “The main hurdle has been in terms of processes, systems and documentation. I think that, for us, making a case for credit derivatives was in many ways the most straightforward part of the process.”

AMP Henderson has more than A$66 billion ($37.1 billion) in assets under management in Australia.