The case explores the direct investment strategy of CPP Investments, one of the largest and most influential pension funds and private equity investors globally. Through an analysis of its acquisition and later sale of a controlling stake in GlobalLogic, students follow the Canadian Pension Fund’s private equity and venture capital investing strategy.

Case A: To extract “cheap” volatility in Duke Energy convertible bonds, Mark Punt, a convertible arbitrageur at KBC AIM, purchases the bonds and delta hedges them with a short position in the company’s shares. To manage the credit risk of his long convertible bond position, Mark faces a choice of hedging with CDS, shares of the company or out-of-the-money puts on the company’s stock.

Case B: Based on a Merton-type structural model of credit risk, Steve Dash, a trader at KBC AIM, perceives that British Airways’CDS are mispriced relative to the company’s share price. Steve has to figure out which trades to put on to exploit the potential mispricing and what the main profit drivers of this strategy are.