When Anthony Bolton speaks, bankers quiver. Last month the highly influential Fidelity fund manager took a sideways swipe at "cov-lite" loans, arguing that these instruments (which lack traditional covenants protecting investors) pointed to a world where liquidity had gone mad.
This week, he laid into collateralised debt obligations, arguing that these instruments contained significant "risks" - and thus could create losses for naive investors further down the road. Whether this claim is correct remains to be seen (unsurprisingly, many bankers do not agree with this assessment). But if Mr Bolton is even partly right, it begs an interesting question: namely if these instruments do end up producing losses, exactly who would be hit?
