As CVC Credit Partners expanded in assets and complexity, the investment manager found rising costs in running its internally developed front-office credit and portfolio analysis platform.
CVC Credit, which manages $13.2 billion in primarily sub-investment grade assets from 14 offices across the U.S. and Europe, uses the same database and query tools it developed when it launched in 2005, according to Philip Raciti, managing director at the firm.
“We have been investing more and more in our systems, infrastructure and headcount to build out workflows to meet our growing demand,” he explained.
The home-grown platform provides CVC Credit analysts and portfolio managers with their own custom spreadsheet-based risk dashboard and standard workflows, but at an ever-increasing cost.
Pulling the necessary data from the system to respond to request-for-quotes (RFQs) or due-diligence questionnaires (DDQs) has taken on a life of its own. “Putting that information together has somewhat become a separate department within CVC Credit, and a full-time investment,” Raciti said.
Raciti noted that CVC Credit’s platform is sophisticated enough to meet the firm’s operational requirements. But even as the loan market has sped up, the platform still relies on end-of-day data to provide the next day’s risk analysis of its various portfolios.
Knowing your risk throughout the day is very important, and several firms have already achieved this, according to Raciti. “A lot of trading desks at various banks have updated their systems to provide very sophisticated analysis. We need to be on the same level as our competitors and banks are.”
To address this issue, CVC Credit is beta-testing Markit’s WSO Credit Manager, which can operate as a standalone platform or be integrated with the vendor’s Wall Street Office (WSO) suite of middle- and back-office applications.
Starting in the first quarter of 2016, CVC Credit plans to integrate the new credit and portfolio analysis with its current implementation of WSO, says Raciti. “We expect to roll it out to our testing committee in the near term and then we will start transition our workflows for our existing system to the Markit System.”
The new offering will help managers evaluate and screen the new paper that syndicating banks offer, as well as surveil their portfolios for such variables as market value, value-at-risk, call schedules and interest rates, according to Markit officials.
Besides using CVC Credit Partner’s existing database of qualitative information on thousands of companies in which the asset manager has invested or researched, the platform will also include Markit’s reference data set and future support of third-party data feeds as well, said Mark Schultis, a managing director at Markit.
“The first areas that we are focusing on are the early adopters’ data, thought processes, and what they are tracking and entering into their investment processes,” he added. “After we address those areas, I believe there will be an evolution in third-party data-feed support.”
Raciti was tight-lipped about the return-on-investment that CVC Credit Partners expects from migrating to the Markit platform and expects the migration to allow the firm to focus on what clients pay the firm to do.
“We are not in the business of building systems and tools as well as spending on hardware infrastructure,” he said. “What we do need to do is focus on risk and managing portfolios."