CDOs provide flexible financing in down markets
This spring didn't look like an auspicious time to offer a loan fund, as the downgrades of both General Motors and Ford Motor to junk status touched off turmoil in the leveraged credit and credit derivative markets.
McDonnell Investment Management's Loan Opportunity Fund offshore, which launched in April, initially bore out such sentiment. In its first month of operation, the fund reported a negative net return of 1.31%.
But then the benefits of a neat financing tool - term leverage - kicked in. While many funds had to sell