With equity markets still moving sideways and no
sign of a revival in corporate profitability, the creation of
structured credit products to meet specialized investor needs
is one of the few business lines still booming at investment
banks. JPMorgan's structured credit business has been taking
full advantage of that in recent months.
Earlier in the year it created Jeci, an instrument that gives
investors a liquid way to gain diversified exposure to credit
default swaps. Now it has devised Merit (Manager Enhanced Return
Increasing Tailor-made), an instrument it says solves a problem
that has troubled investors for some time. The market for managed
portfolio instruments such as collateralized debt obligations
(CDOs) gives them little flexibility in terms of structure. Deals
are big and syndicated, so they rarely match particular
requirements.
The structured credit basket market, by contrast, is primarily
distributed...
