In December, BNP Paribas closed its second Dynamic Proportion Portfolio Notes transaction, which has been given the handy nickname Dynamo. This is an alternative take on the constant proportion portfolio insurance (CPPI) allocation strategy common in the structured products arena and is managed by Crédit Agricole Asset Management.
The collapse in correlation and resultant dislocation in the tranched CDO sector was the story of 2005, but adversity can lead to innovation. The strategy behind Dynamo is to provide enhanced returns to mainstream investors in a low absolute rates and spreads environment.
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