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Managers Using More OTC Derivatives 

December 1, 2014
Greg Bresiger, Financial Advisor Magazine

The often exotic hedging strategies used in over-the-counter (OTC) derivatives swaps contracts are back in favor with portfolio managers.

That’s the view of several fund managers, some of whom question whether they were ever out of favor despite the market meltdown of 2008. Contrary to conventional wisdom, OTC derivative contracts remain an important part of their hedging and liquidity strategies.

Asked about OTC derivatives in the post-Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 environment, managers said that, even before the new law, they believed these contracts were and would remain important tools in running portfolios.

“We still use them as we have used them because for the most part these instruments really serve a purpose for risk management,” according to Daniel Shackelford, manager of T. Rowe Price’s New Income Fund. “We don’t want to lose sight of the fact that we can best serve our clients by using derivatives in some cases in the cash market,” Shackelford adds.

Read more: Financial Advisor Magazine

 
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