May 18, 2023 - Developments in Loan Technology and Data Strategies kicked off with a vivid description of the origination, trade, portfolio monitoring, compliance, accounting, risk, and performance challenges experienced by CLO Managers. An overriding theme was that the pace and volume of CLO market transactions requires timely and accurate loan data.
How do you get there? It is important to invest in data management software, develop data governance models, and partner with vendors and services that will provide the real-time information that is crucial to maintaining compliance, conducting performance attribution, and identifying investment opportunities. Machine learning/artificial intelligence today has the ability to parse and normalize deal terms and covenants in credit agreements with lightning speed, eliminating the time and resources spent reading and collecting information. This information can be transmitted to systems throughout the loan lifecycle, ensuring that all systems throughout an organization have the same information. This also enables lenders to compare terms across deals and industries to make decisions confidently, fully understanding the investment. Through the ability to digitize data, lenders will have the ability to know their respective portfolio positions and loan level details in real-time through one centralized platform. By investing in smart integrations and open application programming interfaces (APIs), this data can be seamlessly transmitted to lenders’ as well as collateral and fund administrators’ systems, saving endless hours previously spent reconciling positions. While admittedly the market is “evolving”, innovative technology could provide the market with the ability to attain straight-through-processing, a process that would benefit by standardizing the data itself.
How does the market get there? The panelists agreed that bringing the market together to develop data standards is a significant role that should be played by the LSTA and one that should enable the system-to-system transmission of a “golden source” of data.
Bottom line: Asset managers should look to partner with vendors who are interested in solving the data and manual workflow challenges and follow industry-led best practice implementations. Investment in technology that will automate internal manual workflows and provide accurate and transparent data will allow more time to focus on business objectives, controls, and data analytics to improve portfolio returns. Help them help you.
