GLOBAL - Institutional investors believe the fallout from the credit crunch will spread to other asset classes and many have moved to mitigate their exposure, according to research by Greenwich Associates.
Some 251 investors in North America, Europe and Asia were questioned about how they had been hit by this summer’s liquidity problems, with 45% stating they had changed their portfolio’s credit profile as a result.
Karan Sampson, hedge fund specialist, Greenwich Associates, said: “Institutions are also focused on limiting counterparty-risk in an atmosphere in which the full extent of the losses and exposures of individual counterparties can be difficult if not impossible to ascertain.”
Half of those questioned said they would be less likely to invest in structured credit products and a large majority said their confidence in credit rating agencies had been shaken as a result of the summer’s volatility.
Frank Feenstra, a consultant at Greenwich Associates, added: “A sizable share of participants say they have stopped investing in fixed income altogether for the time being.”
The survey also found 80% of respondents which held asset-backed securities (ABS), collateralised debt and loan obligations (CDO, CLO) had experienced difficulty in obtaining price quotes from fixed income dealers since the market turmoil.
Tim Sangston, a consultant at Greenwich Associates, said: “In perhaps the clearest indication of the severity and extent of the liquidity disruption, more than 60% of participants active in corporate bonds say they have experienced trouble getting a simple price quote from dealers on these usually liquid products.”
Sangston added: “It’s hardly an exaggeration to call this a total market breakdown.”
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