Max Gokhman, head of asset-allocation at Pacific Life Fund Advisors said another advantage of indexes bundling CDS is that investors don’t need to give up valuable space in their portfolio that could otherwise generate income. To buy a credit derivative, investors only need to set aside a small fee and use their existing cash or bonds as collateral.
This was a more attractive arrangement than setting aside a large cash allocation in anticipation of redemption requests. Cautious money managers who preferred to keep a lot of reserves on hand would underperform against their corporate bond benchmarks and those who were fully invested.
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