Investors flock to fixed-income social network
NEW YORK, July 25 (IFR) - Credit asset management and advisory firm Cairn Capital is the latest adherent to an online social network, DealVector, which calls itself the LinkedIn for structured finance transactions.
The user-generated site offers all types of deal participants in fixed-income transactions the chance to connect anonymously - something that is quite valuable in an industry where information and knowledge can create a competitive advantage.
"We're the Match.com for the buyside," said Mike Manning, the co-founder and CEO of the company which went live earlier this year. The site offers an online venue for participants in all types of securitized deals to share important information while maintaining their privacy.
"Our site is about increasing transparency in the market. This is a way for participants to share information, or concerns about issuers, or for investors to seek out a particular asset to purchase in order to grow their position.
"Or perhaps they want to seek other investors on the same deal to form investor committees or get a vote, while avoiding unintended information leakage," he said.
Cairn subscribed to the platform earlier this month, joining Eton Park Capital, Pine River Capital, Tetragon Financial Group, Perella Weinberg, the Lehman Brothers estate, and service provider Guggenheim Partners, to name a few of DealVector's recent clients. Several financial guarantee insurers are interested as well.
"Finding holders in the fixed income and alternative asset markets has historically been extremely difficult since there are much fewer disclosure requirements than in the equities market," says Greg Larson, a senior vice president of Allison-Williams Company, a Minneapolis-based investment bank that subscribed to DealVector.
"But there are times where it is critically important for the involved parties to be able to communicate. Restructurings and recapitalizations, for example, require negotiations among existing holders and new capital providers. If they can't find each other, the restructuring can't happen. I am hopeful that new technologies like DealVector will help solve a real pain point in this market."
The platform is mainly targeting investors in new and legacy collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs), but is also focusing on legacy residential mortgage-backed securities (RMBS) transactions.
In fact, a so-called "representation and warranty" query was recently added to the site, referring to the legal documentation in soured legacy RMBS deals that was supposed to protect bond investors.
"This is a more efficient way for RMBS investors in legacy deals to get together to enforce their rights," Manning said, comparing it with the expensive full-page Wall Street Journal ads that companies such as CXA Corporation posted late last year to try to get investors to join its investigation into possible rep and warranty breaches.
"That's not an efficient way to find people."
"Inability to communicate means a loss of efficiency in these markets," he told IFR. "DealVector allows investors to find the needle in the haystack without alerting the entire haystack."
Confidentiality is a top priority for the site. Participants are given a numeric ID and do not post their entire portfolios; they are only identified to other participants via two "vectors": the role of the person, and the particular deal that is being discussed.
Dave Jefferds, the co-founder and COO, hopes that the CLO industry will use DealVector to make the rejuvenated asset class more "resilient, smarter, and nimble."
"When things went south and you had repricings, the inability of people to connect during the last crisis proved to be a real problem," he said.
"What can make CLO 2.0 more resilient is better connectivity. We're hoping that managers on new CLOs will begin to bake DealVector into the fabric of what they are doing: it's one great way for the collateral manager to reach holders."
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