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Press Release

Investors reveal approaches to ABS, MBS and CDO market pricing in Principia survey

New York, NY – June 13, 2012 - Principia Partners, the leading software provider for the portfolio management, risk and operational control of structured finance investments, today announced the findings of its ABS, MBS and CDO Market Pricing Survey. The results reveal the range of methodologies and services investors use to obtain market pricing for structured finance and structured credit securities. However, while there are multiple data sources for investors, many challenges remain when managing the growing universe of information across their structured finance positions.

Over 100 senior securitization market participants from 60 organizations took part in the study in May 2012. 93% of respondents purchased pricing data from independent pricing services (IPS) for secondary market price marks. More significantly however, 60% of investors said that they had to access at least two IPSs to obtain pricing across their ABS, MBS and CDO positions, with 16% stating they used four or more sources across their structured finance investments.

In addition, 58% of investors indicated that they still relied on dealer marks for pricing. In the current environment where investor due diligence is the mandated norm for investors, 64% of respondents said they evaluated pricing in-house, alongside their third party sources.

One message was consistent throughout. While data quality and price transparency from third parties were vital to investors, the access and integration of data sources across an operation was fundamentally important. From an operational perspective this was seen as key to managing and using information from multiple sources for effective portfolio management, risk oversight and accounting purposes.

Geographical differences exist between the IPSs used by US and EU investors and also how these services were used depending on exposure to EU or US issued assets. US investors used a broader range of providers than EU investors. Ten suppliers have at least a 15% share of US investors, compared with just five suppliers used to this degree by the EU investor base.

“For price determination alone, investors may use two to five pricing methodologies and data sources across their assets. That doesn’t even scratch the surface of the range of data or tools required to then go and independently monitor the credit performance of deals, or monitor a portfolio of diverse assets, hedges and liabilities,” stated Douglas Long, EVP Business Strategy at Principia. “Ideally, investors want less data sources. The leading data suppliers are moving towards ‘one stop shop’ data solutions but investors need more than just the data. They need the operational infrastructure and workflow control to bring it all together for effective investment decisions, risk management and accounting.“

The full survey results, including a breakdown of the Independent Pricing Services used by investors for ABS, MBS and CDO pricing can be read here:

ABS Pricing Survey Results and Principia Investor Research

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