NEW YORK - The American Securitization Forum announced the results of its Survey of Securitization Market Investors' in a Sunset Seminar it hosted here last week, in which more than half of the investors surveyed defined price discovery and disclosure as two of the most severe issues circling the current market.
The seminar also included a panel monitored by ASF Executive Director George Miller, where industry professionals Sanjeev Handa, managing director at TIAA-CREF, Blake Murphy, vice president at Fortis Securities, LLC, and Mark Stancher, vice president at JPMorgan Asset Management came together to discuss the outcome of the survey.
According to the study, 60% of the respondents identified price discovery and valuation as a key issue.
"I'm not sure there's a huge issue here for triple-A credit cards, or autos," said Miller. "But as you get into more deeply subordinated tranches or more esoteric asset types the issues of price discovery and valuation become more pronounced," he added.
For this, Miller offered multiple solutions.
"It starts with education. There are likely to be more sources of pricing information, price inputs and methodology used to price, and value, securitized instruments that would be beneficial for a broader base of investors to be aware of," he said. Miller added that some of the pricing services could do a better job at explaining how the prices are derived.
A total of 59% of participants interviewed felt deficiencies in timeliness, availability and adequacy of transaction disclosure, and ongoing reporting were major problems the industry was dealing with.
"From a disclosure standpoint - more is better, I always say," said JPMorgan's Stancher. "The asset-backed commercial paper sector has made great strides but could use more disclosure," according to Stancher. Although Stancher believed there was progress in most sectors, he also stated that more disclosure is needed in the home equity industry.
Survey results showed 53% of investors were frustrated with the new-issue allocation and syndication process.
"Dealers keep deals open too long, with the effect being that they are oversubscribed," said an unnamed buyside source in the survey's results. "Those that do their homework and are first through the door should get their allocation," said the source.
Other survey outcomes included 58% of investors identifying legal and regulatory issues to be a significant problem and 56% naming the lack of sufficient uniformity, regularity and predictability. In addition, 45% of investors surveyed pointed out that current yields and spreads were too tight and 42% of survey participants said there was an absence of adequate transaction control processes and procedures, which had the possibility of leading to the problems of fraud or substandard underwriting and documentation.
When asked by Miller if any of the results came as a surprise, Handa responded, "Things are not as gloomy as the survey might suggest. Investors always crave more disclosure, but it is much better than it was a few years ago."
"The survey took place in November and December of last year," Murphy agreed. "At that time, a lot of deals were vaporizing," he said, adding that it was generally a frustrating time for investors in the market.
The results of the survey, conducted by Greenwich Associates, were based on 127 phone interviews that took place with ABS, MBS, CMBS, ABCP and CDO investors, including portfolio managers, investment officers and analysts. ASF member institutions represented 30% of the participants, with 70% representing non-member firms.
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