Fitch Ratings took action last week on E*TRADE when it added E*TRADE Global Asset Management Inc. to the list of CDO managers it has reviewed and for which it has issued manager ratings.
Topping the findings of Fitch's report on the firm were experienced levels of management and staff and the quality of documented credit analysis. Fitch also took note of E*TRADE's strong asset-backed securities surveillance practices and tools. The firm's CDOs are structured to contain the same sector diversification as E*TRADE Bank's investment portfolio, Fitch noted in a release about the ratings. In all, the manager received a composite rating of 1.88 on a scale of one to four, with one being the highest rating.
ABS CDO asset manager ratings are issued by Fitch along nine parameters and E*TRADE's Global Asset Management scored as follows: company and management experience, 2.25; financial condition, 2.50; staffing, 1.75; procedures and controls, 2.25; credit underwriting/asset selection, 1.50; portfolio management, 1.75; CDO administration, 2.00; and technology, 1.75. There was no rating given for its portfolio performance.
To date the firm has two managed ABS CDOs totaling $645 million under its belt - E*TRADE ABS CDO I, issued last September and E*TRADE ABS CDO II, issued in August 2003. The latter CDO, managed by Merrill Lynch, reportedly saw its $312 million top tranche, with a weighted average life of 4.5, price at 63 over the three-month Libor.
The asset manager is an indirect, wholly owned subsidiary of E*TRADE Financial Corp. and manages approximately $25 billion in assets with 34% of total assets under management derived from MBS or ABS structured products.