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Why would/should credit hedge funds use SCDO equity?
If a credit hedge fund is very strong at trading distressed names, why should it bother with SCDO equity? Given that idiosyncratic (i.e. distressed trading to a large extent) is the main risk to manage, why incurring lower liquidity and correlation risk found in a SCDO equity versus managing directly a portfolio of single name CDS? I know a number of them do use SCDO equity, but what is their rationale? Limited recourse?