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HSBC Broadens Investment Team's Horizons
Asset Backed Alert, Harrison Scott Publications Inc. (July 23, 2004)
HSBC is starting to buy a wider variety of securitized products, in greater quantities.
Dominic Swan, who runs a nine-member buyside team in the bank's London headquarters, received permission about two weeks ago to start investing in asset- and mortgage-backed securities with ratings as low as triple-B-minus through one of his portfolios. Until now, Swan only bought bonds rated double-A-minus or higher.
In addition, the buying power of Swan's operation was increased to $6 billion, from $3.5 billion. That portfolio, which now totals $4 billion, will likely reach its new limit by late October. Swan's team took over management of the investments from another area of HSBC last November, when the pool contained about $1 billion of bonds.
The unit also runs Solitaire Funding, a commercial-paper conduit whose issues are collateralized almost entirely by top-rated asset- and mortgage-backed bonds. HSBC increased the arbitrage vehicle's funding capacity in March to $11 billion, from $5 billion. Solitaire has amassed $5.5 billion of collateral since it was launched in November 2001. Those holdings are more than double what they were a year ago, and are expected to reach $8 billion by yearend.