Hedge Funds Are Looking to Fix Credit-Swap Indexes
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Hedge-fund firms Anchorage Capital Group and BlueMountain Capital Management are leading investors pushing to overhaul credit derivatives indexes that they say have become too disconnected from the market they’re supposed to track, according to four people with knowledge of the discussions.
The problem has emerged because index rules require them to be composed of companies with the most actively traded credit-default swaps contracts. Since the financial crisis, trading in swaps has plunged while issuance of corporate debt soared. Swaps tied to recent issuers failed to develop in tandem, leaving the indexes divorced from the underlying market.