Structured finance investors would prefer to rely on fewer sources of pricing for tracking deals, according to 107 investors in the industry surveyed by Principia Partners.
As it now stands, holders of ABS/MBS tend to have multiple pricing sources and face serious operational challenges juggling the data points.
“The difficulties around integrating multiple pricing sources arise because of the amount of manual processes required to bring it all in, the lack of automated feeds and issues with identifying data sources easily,” said the head of credit investment at a major UK bank, who was cited in the survey results. “Understanding pricing depth and correcting stale pricing also takes time with multiple feeds.”
Among the findings, the shop found that 60% of respondents relied on at least two independent sources for ABS pricing and 78% use at least two methods for determining marker pricing. Some 16% of those surveyed said they turned to four or more different data providers.
“Price quality, price transparency and integration of pricing sources ranked as the most important issued for investors when choosing a vendor,” Principia said. “There are a variety of methods that investors use to source the prices, with each method often involving complex evaluation and analysis at the point of establishing a price quote.”
The new regulatory rulebook, with its emphasis on transparency, pushes investors to seek third-party pricing. Still, 64% of respondents said they also evaluated prices in-house.
The survey was made up investors from the U.S. (52%), European Union (46%), and the Asia-Pacific region (2%).
The asset classes held by the respondents — and how popular they are — can be seen below.