Newcomer Fieldstone Capital Group, a broker dealer founded in 2001 by high yield veteran Jonathan Blatt, has spent the past year building up a CDO secondary trading effort. Last week the firm brought on Johnny Srivastava, who was most recently in the securitization origination group at RBC Capital Markets.
Over the past year or so, CDO pros have talked up the emergence of a true secondary market for a historically illiquid product - a hand-in-hand development with increased transparency demanded by noteholders (see related story, p. 10).
A primary concern has been the investment bank's command over secondary pricing, which was a consequence of the market opacity, as the lead bank might have been the only party with enough information on a transaction to conjure up a bid, generally a few 10s outside of new issue levels, no matter how clean the deal.
"The CDO secondary market is currently very illiquid - primary issuance dealers make markets' in their own issuance, but not in others," Fieldstone states on its Web site. "Healthy markets are transparent, liquid, and have multiple market makers. As an independent broker/dealer not involved in the primary CDO market, Fieldstone Capital Group aims to bring greater pricing transparency and liquidity to this market through proprietary research."
The strategy is to provide analysis and evaluation, and to match up the buyer/seller. According to Srivastava, for about a year Fieldstone has been using a whole portfolio net-present value model to realize a CDO's value, a strategy some of the investment houses are shooting for as well.
Srivastava, brought in as a vice president reporting to Managing Director Mark Field, will start in CDO research, then move into institutional sales. At RBC, Srivastava worked in conduits and other securitization-related products.
Fieldstone Capital Group is a division of Fieldstone Services Corp., a wholly owned subsidiary of South African investment bank Gensec Bank.