Highbridge's Dubin Sees `Extraordinary Opportunities' as CDOs Lose Favor

Hedge-fund manager Glenn Dubin, manager of about $27 billion in assets at Highbridge Capital Management, said he sees new opportunities in the market for collateralized-debt obligations, securities blamed for some of the biggest losses during the financial crisis.

Highbridge added a team of CDO specialists to scour the market for the securities as other investors look to offload them, Dubin told Bloomberg Television’s Carol Massar at the Hedge Funds New York conference sponsored by Bloomberg Link.

“We think the CDO market will revitalize itself,” Dubin said. “Looking ahead to that period in 2014, we think there will be extraordinary opportunities as people unwind these CDOs because, as you point out, they are moving from investment-grade to non-investment-grade status and many institutions can’t own them.”

Dubin said he feels “fairly constructive” about the U.S. equity and bond markets, mostly due to the Federal Reserve’s latest round of stimulus measures.

“The Fed has spoken loud and clear,” he said. “They’re going to keep zero rates there for the foreseeable future and their goal is to move financial assets and financial markets higher. If I’ve learned anything in my 30-year career in finance, it’s the old adage, which is don’t fight the Fed.”

After sitting on the sidelines earlier this week while Ireland’s debt crisis unfolded, Dubin said he now has put “risk on” over the last two days, meaning he’s investing in the markets.

“Monday and Tuesday were a risk-off environment, but we were encouraged when we saw the U.S. market activity was actually beginning to decouple from what was happening in Europe, which was in contrast with what happened during the first European debt crisis in the spring,” he said, adding that it gave his team “the confidence to increase our risk exposure.”

Highbridge is a wholly owned subsidiary of JPMorgan Chase & Co., the second-largest U.S. bank by assets.

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.com; Carol Massar in New York at cmassar@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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