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Press Release

ABS Investors Demand Increased Operational Control over Loan Level and Collateral Performance Data in Principia Survey

New York, NY – Jan 31, 2013 - Principia, the leading software provider for the portfolio management, risk and operational control of structured finance investments, today announced the key findings of a survey focusing on structured finance investor’s use of loan level and collateral performance data. 51% currently believe that their operational systems are less than effective at consistently managing this growing volume of data across their ABS, MBS and CDO investments. The full results highlight the varying approaches and granularity investors go to when analyzing securitization exposures, and who they turn to for this data.

Over 100 securitization investors from 63 organizations took part in the study in Q4 2012. 60% said that they use four or more different data sources for collateral performance data alone, with more than 80% of those surveyed confirming that it is a challenge to normalize performance data across multiple different data sources.

Global capital requirements and due diligence mandates now demand that investors are able to demonstrate adequate independent credit analysis, risk management and timely reporting when investing in structured finance assets. Key to this is access to, and effective management of, initial and on-going performance data on the underlying pools and collateral backing securitized assets.

Every respondent stated that accessing timely securitization and tranche detail information was absolutely fundamental to their operational credit analysis. 95% said that they referred to aggregate pool statistics and stratification tables highlighting collateral performance. In addition, 85% of investors stated that they also drill down and analyze loan level data for at least one asset class.

Market initiatives in the EU to implement a more consistent infrastructure for loan level data and more regulatory clarity have improved investor confidence in the securitization framework in the region. While US investors demonstrated more confidence in the use of loan level data itself, continued regulatory uncertainty is affecting investor confidence. US investors remain unsure as to whether the information that is currently disclosed by issuers will be enough to meet final due diligence demands and capital requirements.

The majority (90%) of respondents were unified in stating that it is not easy to use or manage RMBS loan level data due to on-going differences in disclosure standards.

One theme was consistent throughout. While data quality, availability and disclosure are improving and while investors now see analysis using this information as mandatory, the integration of data sources across an operation represents a real and present challenge. Gaining this sophistication is now seen as fundamental to efficient and effective portfolio management, risk oversight, audit control and financial reporting for structured finance assets.

“We can see that as confidence returns to the securitization market, investors that are scaling up are beginning to experience these operational challenges. Gaining efficiencies in the analysis, control and risk management of these kinds of assets is a growing business concern,” stated Douglas Long, EVP Business Strategy at Principia. “Investors are prioritizing due diligence. We anticipate further data standardization that is geared towards meeting investor due diligence requirements, as well as an increased demand for operational solutions dedicated to structured finance that can bring data and analytics together in a meaningful way to drive effective and controlled investment decisions, risk surveillance and accounting.”

The full survey results, including a breakdown of the services used by investors for ABS, MBS and CDO performance and loan level data can be found here: http://www.ppllc.com/ABS_Investor_Research.htm

This is the second survey of three focusing on the operational demands of structured finance investors. The first study, “Trends in ABS, MBS & CDO Market Pricing” explores investor’s use of secondary market pricing data. The full report can also be found on the link above.

About Principia Partners
Principia Partners LLC (Principia) provides a comprehensive single platform solution for the end-to-end management of structured finance investments. Global financial institutions and independent asset managers have used the award winning Principia Structured Finance Platform since 1995 to unify investment analysis, portfolio management, risk surveillance, accounting and operational control across the breadth of structured credit assets, fixed income investments and complex derivatives.

For over 15 years Principia’s mission has been to help investors independently address the deal specific investment and cashflow analysis, valuation, risk management, reporting and due diligence requirements of structured credit investments and portfolios. Its dedicated support and continued development of functionality for structured finance instruments is accompanied by a proven and fully integrated derivative valuation framework. This overall credit investment and market risk solution delivers the robust backbone necessary for deeper investment analysis, proactive risk surveillance and operational control across the credit investment business.

Principia is based in New York, with an office in London and a technology center in Conshohocken, Pennsylvania. Principia SFP was awarded the Credit Technology Innovation award by Credit magazine in 2008, 2009 and 2010.

For press information contact:
Ben Jarrold
Tel: + 44 (0) 20 7618 1370
Email: Jarrold@ppllc.com