COO at Global Asset Owner: “Onboarding private credit assets following a consolidation of investment books…”
The consolidation of three separate books of both public and private assets needed to be reflected on a single firm-wide risk management reporting platform. The inclusion of listed assets was straightforward given the use of standard market identifiers such as ISIN, CUSIP where the security T&Cs are openly available and can be imported en masse to the new risk platform.
The challenge was around private assets where the T&Cs are not freely available and have to be sourced from the initial deal documentation and then evolved through the investment life cycle as new / investment parties are added. The private credit universe in question covered private placements, infrastructure loans, European credit agreements and local authority loans.
Our approach was to first identify the mandatory and optional inputs require by each security type on the risk platform and then conduct a deep dive of the individual deal documentation to extract the required T&Cs. Then create a security master for each instrument and flagging if a certain T&C had been inferred as opposed to readily available. This security master was then scored for coverage and impact analysis carried out as regards mandatory vs optional inputs required by the risk management application.
Whilst the above is a standard approach to sourcing security T&Cs, the expertise of our consultants very early on flagged a number of additional challenges that neither the client nor vendor had raised. These were around coverage of certain security types and the behaviour of the risk platform calculations and their algorithms to private credit as an asset class on the whole.
Our solutions included :
- Use of a hybrid security workaround that created a quasi asset in the vendor universe to mimic what the client required
- Use of market proxies and beta’s to create the appropriate market signals in the vendor risk model to reflect private credit
- Future-proofing for new private credit security type take-on activities
Given the expertise of our consultants, the above obstacles were navigated early on in the project run plan and the on-boarding of a complex and illiquid asset class was delivered on time and to budget.
Our consultants have deep product knowledge coupled with market-leading systems expertise which allows us to provide the best project outcome to the client.
