Rabobank plans to market its first long/short collateralized debt obligation before the end of the second quarter. The deal is estimated at $500-800 million and will short asset-backed securities, according to Sheldon Sussman, global head of structuring and portfolio management, global financial markets.

The Hamilton Gardens CDO is currently ramping up assets. Sussman declined to detail which sectors the CDO will short and go long. "The rating agencies and investors have already seen a more common form of CDO where the portfolio has CDS. We're adding another potentially positive variation, which is to explicitly go short," he said.

State Street Global Advisors' Diogenes deal pioneered the secured debt long/short CDO last fall, but so far the structure has not been widely replicated. "Before the [International Swaps and Derivatives Association] template, there was no efficient way to short residential mortgage risk. Now the documentation is standardized it's much easier," Sussman said.

Deutsche Bank is the lead arranger.