The subject of Illiquid Credit is perhaps not popular on many news channels, but it is an area of investment banking that is open to innovation just like many others.
Investment banking that is often linked to Real Estate, among other asset classes. A sector seeing certain tendencies to fluctuate recently as offices stand empty in various cities around the world.
Consider how Larry Fink, CEO and Chairman of BlackRock, told us this week that:
“Technology and investing in data and analytics is changing the way we invest and that will transpire into a huge differentiation between companies who are moving forward and companies who are not doing much. And we will see this in valuations.”
Some of these companies will become harder to finance, to sell, to make attractive. Similarly to the fate of many of our city centres.
Fixed Income Portfolio Management and Illiquidity
Much of this centres around fixed-income markets where institutional investors have turned to alternative-credit strategies as a way of increasing returns and diversifying risk. Accepting illiquidity risk can give very high returns, so many investment banks are also involved in this area.
According to Hermes Investment Management, the prices of illiquid assets tend to be ‘sticky’, which can make them appear less risky than they really are. They can be marked inaccurately when marketed, so they look better than they are.
And, just like any other area that Investment banks operate in, there is scope for improvement. Much of the work is still manual and telephone based and there is need for both automation and better analytics.
Providers for technology solutions outside of the largest custodians like BlackRock are still not catering for all the needs that banks may have. We covered a story about Scorable’s recent merger with BondIT, Scorable use artificial intelligence to analyse credit. There are solutions out there already, but are they really catering for the needs of banks?
Oxane Partners leverage Indian Tech
Just this month, more information about how investment banks work in this field emerged when Oxane Partners released a story about how they recently signed three global investment banks for their illiquid credit portfolio management solution:
Naturally, we wanted to find out what all the fuss was about.
Oxane Partners were founded by Vishal Soni and Sumit Gupta, who have amassed a combined experience of over 35 years in investment banking.
They saw the opportunity in the market after difficulties faced by economies like Portugal and Ireland and others after the Global Financial Crisis, and decided to set up the firm.
Private equity firms play an important part in funding illiquid credit., and Vishal and Sumit have years of experience working with these firms.
The technology part of Oxane was already in process when the firm started, but it took several years before the leadership team were in a position to really harness the potential of the technology.
Initially the technology focussed on bringing trade counter-parties together, however later it became far more sophisticated.
Investment Banks adopt Oxane Partners solution
Today, Oxane Partners work with one of the largest European investment banks. The bank wanted to transition from existing Excel based processes to a unified portfolio management and reporting solution that could holistically cover their entire illiquid credit book. This would help them address data accuracy and consistency issues, efficiently track all covenant and reporting obligations and enable effective credit monitoring and surveillance at scale.
Oxane Partners combined a flexible, multi-asset technology platform and a team of domain experts to provide a portfolio management solution that gave the bank comprehensive coverage and operational scalability to manage their growing book of €25+ billion illiquid credit investments. The solution drove operational efficiencies across the whole lifecycle of a transaction enabling their in-house team to focus on more critical activities.
With a centralized and unified view across diverse assets, comprehensive dashboards that cover risk and performance analytics, and automated reporting, the risk management function realigned from a reactive to a pre-emptive risk and portfolio management approach.
The enhanced transparency and accessibility have helped the bank tighten their risk and performance controls. With a responsive team of analysts and the flexibility of Oxane’s multi-asset technology platform, the bank’s illiquid credit desk has the agility to respond to new market developments swiftly, stay on top of their portfolio amidst protracted market uncertainty and scale their portfolio without adding complexity be it investments in new trades, geographies or asset classes.
The founders of Oxane Partners had the following thoughts to share about onboarding three new investment banks recently:
“Banks have long-desired a technology solution that is flexible enough to support the diversity of deals across their illiquid credit trades but robust enough to maintain tight organisational controls. We aim to bridge that gap by helping banks transform their portfolio management processes with Oxane Panorama’s flexible technology architecture to enhance transparency, data integrity, and risk controls.”, commented Sumit Gupta, co-Founder at Oxane Partners.
“Seeing Oxane Panorama resonate so well with global investment banks in a short span of time goes to show that banks are eager for a unified solution that can support multiple asset types. We welcome these global investment banks to our growing list of clients as we help them realise their goals of better control over their portfolio and risk management processes.”, added Vishal Soni, co-Founder at Oxane Partners.
Many of the team at Oxane Partners come from companies like Deutsche Bank, Barclays, Credit Suisse, Morgan Stanley, and others. They have harnessed the talent available in India, while continuing a sales plan covering Western Europe and the U.S. as well as many other parts of the globe.
Disruption in all areas of Investment Banking will be facing the industry soon. Solutions like those that Oxane Partners offer are just the start of the type of innovation we will see in Fixed income this year and in the future.
Author: Andy Samu
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