Over the past several months, the quality of deal data and investor reporting in the collateralized debt obligation market has been steadily improving, according to market participants.

Historically, the single biggest gripe from the investment community has been the quality of the 150-page monthly trustee reports, sometimes dubbed "phone books."

"One of the main reasons that CDOs trade wider than other ABS is that there's been a lack of transparency in the market," said one CDO researcher.

Different strategies are emerging, and, according to industry participants, service providers are starting to use their information systems to differentiate themselves from their competitors.

For example, Wells Fargo's CDO trustee group, which launched last fall, was marketing itself from day one as a shop with a highly developed information system, built off the platform the bank has used in its mortgage and asset-backed trustee businesses for several years.

"Wells Fargo is a prime example," said Kent Youngberg, from Penstock Partners, a structured finance product development firm that has developed CDOs and other structured products. "[Wells] built their information systems platform before they brought the business through the door, and their abilities benefit a number of parties, including investors, guarantors, and structures."

According to Daniel Patton, a vice president at Wells Fargo, the bank offers a concise, 23-page report via the Internet, with the data 100% downloadable. The firm boasts a complete list of specific assets in the deal, with more than 100 potential data points for each position. In addition, Wells offers a complete transaction file for each reporting period.

"We are limited to reporting items allowed by the documents under which we must operate," Patton said. "We request the ability to report more rather than less, but this is not always desired by the deal manager or their underwriter."

Deutsche Bank's approach, on the other hand, included partnering with Lewtan Technologies, streaming its trustee data into Lewtan's iCDO platform, which allows the collateral managers access to features such as real time transaction data and hypothetical trades.

"We'll have the ability to give that information to the investor on a time lag, if that's what the collateral manager wants," said a source in product development at Lewtan. "That way the manager won't feel like the investor is hovering over his shoulder."

Collateral Managers

Aside from developments by trustees and other third party servicer providers, collateral managers themselves have been working to improve their information systems and investor reporting, often through Web sites.

However, with CDOs, collateral managers have been reluctant to tell all, for proprietary reasons, as the vehicles are highly structured, strategically managed funds.

"The Web sites work well as a marketing tool, but I don't know how prudent it is for any manager or any of the Web sites to put out portfolio specific information about their deals, other than to their investors and guarantors in their own transactions," said Penstock's Youngberg.

Additionally, there are several legal barriers. According to a Scott Roberts of Deerfield Capital Management, since collateral managers are not securities dealers, they need to be wary of front-running and other legal landmines.

Deerfield markets itself as being top-of-the-line when it comes to investor accessibility and transparency. Via a website, the firm offers its investors data parallel to the trustee report, reformatted for easier access. The Web site includes a complete listing of each deal's collateral, and often a link to the actual trustee report.

Deerfield's system is secure, and only available to its investors or other designated parties, the company said.

Street/Rating Agency

Simultaneously, weekly Street research on CDOs has become more robust and comprehensive, often including pricing data and deal pipelines. The rating agencies have also made efforts to broaden information in the sector.

For example, Standard & Poor's, which last fall released a list of nearly every deal the agency had rated (dating back to 1994), introduced an arbitrage CDO tracking index earlier this year.

"I think it's generally very good for the market when the rating agencies make a lot of information available to the market," said one CDO issuer.

Fitch recently launched a novel CDO surveillance component to its Web site, tracking the entire history of all ratios against the benchmark test for every class of every deal it has rated. The site includes other factors, such as triple-C ratios, obligor concentrations, sector concentration, and weighted average life of the assets.

Fitch's data is not yet downloadable in spread sheet form, but the agency is heading in that direction. Fitch will also add deal comparison capabilities, so that an investor can isolate a deal by characteristics such as vintage, underwriter, or collateral managers, then compare the transactions side by side.

What Fitch doesn't plan to offer is a list of specific assets and positions in the pool, or features like hypothetical trades.

"Our goal is to provide some more transparency, and data on how the CDO is doing, but our goal is never to put the manager in a bad position in terms of managing their portfolio," said Brian Gordon, a CDO analyst at Fitch.

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