CDS Revival Falling Short As Fund Managers Hedge Rate Risk

As major central banks around the world embark on a plan to “normalize” interest rates -- allowing market forces, not central economic planners, to more directly influence outcomes – there is a concern. With a prolonged period of market suppression through quantitative easing successful influencing interest rates, taking them negative in some cases, could volatility or un-intended market consequences become a bi-product?

This is a concern among institutional investors.

A recent Greenwich Associates study listed such credit default swaps as top three among many derivative concerns. As a result, hedging has become a hotly discussed topic among hedge fund traders and asset managers -- while the elusive search for alpha has moved to the bottom of the list.

Regulatory changes that...